ValuAdder. Business Valuation Handbook. Eighth Edition

Transcription

1 ValuAdder Business Valuation Handbook Eighth Edition

2 ValuAdder Business Valuation Handbook Eighth Edition Copyright Haleo Corporation All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, faxing, ing, posting online or by any information storage and retrieval system, without written permission from Haleo Corporation. ValuAdder and the ValuAdder logo are trademarks or registered trademarks of Haleo Corporation. Mac is a trademark of Apple Inc., registered in the U.S. and other countries. Windows is either a registered trademark or trademark of Microsoft Corporation in the United States and/or other countries. Adobe, Adobe PDF, and Adobe Reader are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners. To purchase additional copies of this Handbook, please visit: ValuAdder Business Valuation Tools P.O. Box 245 West Linn, OR USA ISBN:

3 Table of Contents Introduction to the ValuAdder Business Valuation Handbook... ix Business valuation based on income, assets, and market comparables... 1 Getting started with ValuAdder... 3 Quick tips... 4 I. Business Valuation Guide... 5 Measuring business worth: The three approaches... 6 Five steps to value any business... 9 Business valuation: Why and how to do it Business valuation based on market comparisons Choosing methods to value a business Company valuation results depend on your assumptions Keep your business valuation current Top 7 mistakes to avoid II. Business Valuations for Different Purposes Business valuation for the business buyer Looking for a business to buy: Time-saving tools and tips What is the business worth? Avoid costly mistakes: Structuring your purchase offer Business valuation for the owner Top 5 reasons to value your business What is my business worth? How to increase your business value Business sale: Maximize your price! Valuation for buy-sell agreements and partner buyout Gift and estate taxes Business valuation in divorce Employee stock ownership plans (ESOPs) Lender s perspective on business valuation III. Tutorials Business Valuation Step by Step Business valuation method summary Business Goodwill: Why businesses are worth more than their assets Market Comps: Business valuation based on comparable business sales Earnings Multiple: Valuing a business based on cash flow Discounted Cash Flow: Risks, returns, and business value Net Present Value: Is the business worth the price? Deal Check: Structuring your business sale or purchase Loan Schedule: Business acquisition financing terms Future Value: How business value grows over time Employee Stock Option Valuation Tutorial Business valuation: common situations, method choices From accounting statements to business value: Recasting financials Entering your data into ValuAdder Your business valuation scenarios Creating your business valuation reports Using what-if scenarios in business valuation IV. ValuAdder Business Valuation Software Tools Customize your tools: Start Tab Choosing your business valuation methods with a mouse click Business Goodwill Tab How to calculate business goodwill and total business value Your inputs: Earnings, assets, rates of return iii

4 ValuAdder Business Valuation Handbook Market Comps Tab How to calculate business market value Just a few inputs Gross revenue or net sales Earnings Multiple Tab How to value a business: Earnings and valuation multipliers What are my inputs? Multiplier table How the earnings multiplier is calculated Discounted Cash Flow Tab Company valuation: Cash flows and discount rates What inputs are needed? Net Present Value Tab Business valuation: What is my investment worth? What are my inputs? Deal Check Tab How to put together a successful business acquisition Your inputs here Loan Schedule Tab How to check seller financing and bank loan terms What inputs are needed? Future Value Tab How value of business assets grows over time Your inputs V. ValuAdder Menu: Using Your Business Valuation Software to Get Results I. File New Open Open in New Window Save Save As Export Page Setup Print Close Exit II. Edit: Speeding up your business valuation Cut Copy Paste III. Tab: Customizing your business valuation tools Add Delete Duplicate Change Name Move Left Move Right IV. Reports: Communicating your business valuation results Create Report Save Report Print Report Page Setup About ValuAdder Reports V. Tools: Saving time iv

5 ValuAdder Business Valuation Handbook Auto Calculate Calculate Median in Market Comps Worksheets for Recasting Financials Employee Stock Option Valuation VI. Help: Business valuation Info Center at your fingertips Contents Tutorials Glossary of business valuation terms Index Search Save Printable Handbook Show Tips License Agreement About ValuAdder VI. Glossary: Business Valuation Terms, Explanations, Tips and Examples Addbacks Amortization Asset accumulation valuation method Asset assemblage business value premise Asset purchase Assets Balance sheet Balloon loan Business enterprise value Business goodwill Business market value Business valuation approaches Basis of business value Business value definition Capitalization of earnings valuation method Capitalization rate Current assets Current liabilities Debt financing Debt service coverage ratio Depreciation Discounted cash flow valuation method Discount for lack of marketability Discount rate Due diligence Earnings Earnout Excess earnings valuation method Fair market value Fair value basis Forced liquidation business value premise Furniture, fixtures and equipment Going concern business value premise Interest Internal rate of return Intrinsic business value definition Inventory Investment business value definition Liabilities v

6 ValuAdder Business Valuation Handbook Long-term liabilities Minority ownership discount Multiple of discretionary earnings valuation method Net cash flow Net present value Net realizable value Net working capital Orderly disposition business value premise Premise of business value Present value Principal Profit and loss Project costs Return on investment Recast financials Market comps valuation method Seller's discretionary cash flow Seller's note Stock purchase Terminal value Transaction costs Valuation multiple Weighted average cost of capital Working capital Index A. Software License Agreement vi

7 List of Tables 1. Earnings Multiple multiplier table Earnings Multiple weight selections vii

8 List of Equations 1. Seller's discretionary cash flow formula, simple average Seller's discretionary cash flow formula, weighted average Seller's discretionary cash flow formula, squared weighted average Terminal value formula Terminal value calculation example Discounted Cash Flow math Discount rate build-up formula WACC formula Constant growth capitalization viii