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Valuing a Company: Business Valuation Defined With 6 Methods

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What Is a Business Valuation?

The basics of business valuation, methods of valuation.

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Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

A business valuation, also known as a company valuation, is the process of determining the economic value of a business. During the valuation process , all areas of a business are analyzed to determine its worth and the worth of its departments or units.

A company valuation can be used to determine the fair value of a business for a variety of reasons, including sale value, establishing partner ownership, taxation, and even divorce proceedings. Owners will often turn to professional business evaluators for an objective estimate of the value of the business.

Key Takeaways

• Business valuation determines the economic value of a business or business unit.
• Business valuation can be used to determine the fair value of a business for a variety of reasons, including sale value, establishing partner ownership, taxation, and even divorce proceedings.
• Several methods of valuing a business exist, such as looking at its market cap, earnings multipliers, or book value, among others.

Investopedia / Katie Kerpel

The topic of business valuation is frequently discussed in corporate finance. Business valuation is typically conducted when a company is looking to sell all or a portion of its operations or looking to merge with or acquire another company. The valuation of a business is the process of determining the current worth of a business , using objective measures, and evaluating all aspects of the business.

A business valuation might include an analysis of the company's management, its capital structure , its future earnings prospects or the market value of its assets. The tools used for valuation can vary among evaluators, businesses, and industries. Common approaches to business valuation include a review of financial statements, discounting cash flow models and similar company comparisons.

Valuation is also important for tax reporting. The Internal Revenue Service (IRS) requires that a business is valued based on its fair market value. Some tax-related events such as sale, purchase or gifting of shares of a company will be taxed depending on valuation.

Estimating the fair value of a business is an art and a science; there are several formal models that can be used, but choosing the right one and then the appropriate inputs can be somewhat subjective.

There are numerous ways a company can be valued . You'll learn about several of these methods below.

1. Market Capitalization

Market capitalization is the simplest method of business valuation. It is calculated by multiplying the company’s share price by its total number of shares outstanding. For example, as of January 3, 2018, Microsoft Inc. traded at $86.35. With a total number of shares outstanding of 7.715 billion, the company could then be valued at $86.35 x 7.715 billion = $666.19 billion.

2. Times Revenue Method

Under the times revenue business valuation method, a stream of revenues generated over a certain period of time is applied to a multiplier which depends on the industry and economic environment. For example, a tech company may be valued at 3x revenue, while a service firm may be valued at 0.5x revenue.

3. Earnings Multiplier

Instead of the times revenue method, the earnings multiplier may be used to get a more accurate picture of the real value of a company, since a company’s profits are a more reliable indicator of its financial success than sales revenue is. The earnings multiplier adjusts future profits against cash flow that could be invested at the current interest rate over the same period of time. In other words, it adjusts the current P/E ratio to account for current interest rates.

4. Discounted Cash Flow (DCF) Method

The DCF method of business valuation is similar to the earnings multiplier. This method is based on projections of future cash flows, which are adjusted to get the current market value of the company. The main difference between the discounted cash flow method and the profit multiplier method is that it takes inflation into consideration to calculate the present value.

5. Book Value

This is the value of shareholders’ equity of a business as shown on the balance sheet statement. The book value is derived by subtracting the total liabilities of a company from its total assets.

6. Liquidation Value

Liquidation value is the net cash that a business will receive if its assets were liquidated and liabilities were paid off today.

This is by no means an exhaustive list of the business valuation methods in use today. Other methods include replacement value, breakup value, asset-based valuation , and still many more.

Accreditation in Business Valuation

In the U.S., Accredited in Business Valuation (ABV) is a professional designation awarded to accountants such as CPAs who specialize in calculating the value of businesses. The ABV certification is overseen by the American Institute of Certified Public Accountants (AICPA) and requires candidates to complete an application process, pass an exam, meet minimum Business Experience and Education requirements, and pay a credential fee (as of Mar. 11, 2022, the annual fee for the ABV Credential was $380).

Maintaining the ABV credential also requires those who hold the certification to meet minimum standards for work experience and lifelong learning. Successful applicants earn the right to use the ABV designation with their names, which can improve job opportunities, professional reputation and pay. In Canada, Chartered Business Valuator ( CBV ) is a professional designation for business valuation specialists . It is offered by the Canadian Institute of Chartered Business Valuators (CICBV).

Internal Revenue Service. " Sale of a Business ."

Yahoo Finance. " Microsoft Corporation (MSFT) ."

Association of International Certified Professional Accountants. " Distinguish Yourself. Obtain the Accredited in Business Valuation (ABV) Credential ."

Association of International Certified Professional Accountants. " AICPA Annual Membership Dues ."

• Valuing a Company: Business Valuation Defined With 6 Methods 1 of 37
• What Is Valuation? 2 of 37
• Valuation Analysis: Meaning, Examples and Use Cases 3 of 37
• Financial Statements: List of Types and How to Read Them 4 of 37
• Balance Sheet: Explanation, Components, and Examples 5 of 37
• Cash Flow Statement: How to Read and Understand It 6 of 37
• 6 Basic Financial Ratios and What They Reveal 7 of 37
• 5 Must-Have Metrics for Value Investors 8 of 37
• Earnings Per Share (EPS): What It Means and How to Calculate It 9 of 37
• P/E Ratio Definition: Price-to-Earnings Ratio Formula and Examples 10 of 37
• Price-to-Book (PB) Ratio: Meaning, Formula, and Example 11 of 37
• Price/Earnings-to-Growth (PEG) Ratio: What It Is and the Formula 12 of 37
• Fundamental Analysis: Principles, Types, and How to Use It 13 of 37
• Absolute Value: Definition, Calculation Methods, Example 14 of 37
• Relative Valuation Model: Definition, Steps, and Types of Models 15 of 37
• Intrinsic Value of a Stock: What It Is and Formulas to Calculate It 16 of 37
• Intrinsic Value vs. Current Market Value: What's the Difference? 17 of 37
• The Comparables Approach to Equity Valuation 18 of 37
• The 4 Basic Elements of Stock Value 19 of 37
• How to Become Your Own Stock Analyst 20 of 37
• Due Diligence in 10 Easy Steps 21 of 37
• Determining the Value of a Preferred Stock 22 of 37
• Qualitative Analysis 23 of 37
• How to Choose the Best Stock Valuation Method 24 of 37
• Bottom-Up Investing: Definition, Example, Vs. Top-Down 25 of 37
• Financial Ratio Analysis: Definition, Types, Examples, and How to Use 26 of 37
• What Book Value Means to Investors 27 of 37
• Liquidation Value: Definition, What's Excluded, and Example 28 of 37
• Market Capitalization: What It Means for Investors 29 of 37
• Discounted Cash Flow (DCF) Explained With Formula and Examples 30 of 37
• Enterprise Value (EV) Formula and What It Means 31 of 37
• How to Use Enterprise Value to Compare Companies 32 of 37
• How to Analyze Corporate Profit Margins 33 of 37
• Return on Equity (ROE) Calculation and What It Means 34 of 37
• Decoding DuPont Analysis 35 of 37
• How to Value Private Companies 36 of 37
• Valuing Startup Ventures 37 of 37

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How to Value a Company: 6 Methods and Examples

• 21 Apr 2017

Determining the fair market value of a company can be a complex task. There are many factors to consider, but it's an important financial skill businesses leaders need to succeed. So, how do finance professionals evaluate assets to identify one number?

Below is an exploration of some common financial terms and methods used to value businesses, and why some companies might be valued highly, despite being relatively small.

What Is Company Valuation?

Company valuation, also known as business valuation, is the process of assessing the total economic value of a business and its assets. During this process, all aspects of a business are evaluated to determine the current worth of an organization or department. The valuation process takes place for a variety of reasons, such as determining sale value and tax reporting.

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How to Valuate a Business

One way to calculate a business’s valuation is to subtract liabilities from assets. However, this simple method doesn’t always provide the full picture of a company’s value. This is why several other methods exist.

Here’s a look at six business valuation methods that provide insight into a company’s financial standing, including book value, discounted cash flow analysis, market capitalization, enterprise value, earnings, and the present value of a growing perpetuity formula.

1. Book Value

One of the most straightforward methods of valuing a company is to calculate its book value using information from its balance sheet . Due to the simplicity of this method, however, it’s notably unreliable.

To calculate book value, start by subtracting the company’s liabilities from its assets to determine owners’ equity. Then exclude any intangible assets. The figure you’re left with represents the value of any tangible assets the company owns.

As Harvard Business School Professor Mihir Desai mentions in the online course Leading with Finance , balance sheet figures can’t be equated with value due to historical cost accounting and the principle of conservatism. Relying on basic accounting metrics doesn't paint an accurate picture of a business’s true value.

2. Discounted Cash Flows

Another method of valuing a company is with discounted cash flows. This technique is highlighted in the Leading with Finance as the gold standard of valuation.

Discounted cash flow analysis is the process of estimating the value of a company or investment based on the money, or cash flows, it’s expected to generate in the future . Discounted cash flow analysis calculates the present value of future cash flows based on the discount rate and time period of analysis.

Discounted Cash Flow =

Terminal Cash Flow / (1 + Cost of Capital) # of Years in the Future

The benefit of discounted cash flow analysis is that it reflects a company’s ability to generate liquid assets. However, the challenge of this type of valuation is that its accuracy relies on the terminal value, which can vary depending on the assumptions you make about future growth and discount rates.

3. Market Capitalization

Market capitalization is one of the simplest measures of a publicly traded company's value. It’s calculated by multiplying the total number of shares by the current share price .

Market Capitalization = Share Price x Total Number of Shares

One of the shortcomings of market capitalization is that it only accounts for the value of equity, while most companies are financed by a combination of debt and equity.

In this case, debt represents investments by banks or bond investors in the future of the company; these liabilities are paid back with interest over time. Equity represents shareholders who own stock in the company and hold a claim to future profits.

Let's take a look at enterprise values—a more accurate measure of company value that takes these differing capital structures into account.

4. Enterprise Value

The enterprise value is calculated by combining a company's debt and equity and then subtracting the amount of cash not used to fund business operations.

Enterprise Value = Debt + Equity - Cash

To illustrate this, let’s take a look at three well-known car manufacturers: Tesla, Ford, and General Motors (GM).

In 2016, Tesla had a market capitalization of $50.5 billion. On top of that, its balance sheet showed liabilities of $17.5 billion. The company also had around $3.5 billion in cash in its accounts, giving Tesla an enterprise value of approximately $64.5 billion.

Ford had a market capitalization of $44.8 billion, outstanding liabilities of $208.7 billion, and a cash balance of $15.9 billion, leaving an enterprise value of approximately $237.6 billion.

Lastly, GM had a market capitalization of $51 billion, balance sheet liabilities of $177.8 billion, and a cash balance of $13 billion, leaving an enterprise value of approximately $215.8 billion.

While Tesla's market capitalization is higher than both Ford and GM, Tesla is also financed more from equity. In fact, 74 percent of Tesla’s assets have been financed with equity, while Ford and GM have capital structures that rely much more on debt. Nearly 18 percent of Ford's assets are financed with equity, and 22.3 percent of GM's.

When examining earnings, financial analysts don't like to look at the raw net income profitability of a company. It’s often manipulated in a lot of ways by the conventions of accounting, and some can even distort the true picture.

To start with, the tax policies of a country seem like a distraction from the actual success of a company. They can vary across countries or time, even if nothing actually changes in the company’s operational capabilities. Second, net income subtracts interest payments to debt holders, which can make organizations look more or less successful based solely on their capital structures. Given these considerations, both are added back to arrive at EBIT (Earnings Before Interest and Taxes), or “ operating earnings .”

In normal accounting, if a company purchases equipment or a building, it doesn't record that transaction all at once. The business instead charges itself an expense called depreciation over time. Amortization is the same thing as depreciation but for things like patents and intellectual property. In both instances, no actual money is spent on the expense.

In some ways, depreciation and amortization can make the earnings of a rapidly growing company look worse than a declining one. Behemoth brands, like Amazon and Tesla, are more susceptible to this distortion since they own several warehouses and factories that depreciate in value over time.

With an understanding of how to arrive at EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for each company, it’s easier to explore ratios.

According to the Capital IQ database , Tesla had an Enterprise Value to EBITDA ratio of 36x. Ford's is 15x, and GM's is 6x. But what do these ratios mean?

6. Present Value of a Growing Perpetuity Formula

One way to think about these ratios is as part of the growing perpetuity equation. A growing perpetuity is a kind of financial instrument that pays out a certain amount of money each year—which also grows annually. Imagine a stipend for retirement that needs to grow every year to match inflation. The growing perpetuity equation enables you to find out today’s value for that sort of financial instrument.

The value of a growing perpetuity is calculated by dividing cash flow by the cost of capital minus the growth rate.

Value of a Growing Perpetuity = Cash Flow / (Cost of Capital - Growth Rate)

So, if someone planning to retire wanted to receive $30,000 annually, forever, with a discount rate of 10 percent and an annual growth rate of two percent to cover expected inflation, they would need $375,000—the present value of that arrangement.

What does this have to do with companies? Imagine the EBITDA of a company as a growing perpetuity paid out every year to the organization’s capital holders. If a company can be thought of as a stream of cash flows that grow annually, and you know the discount rate (which is that company’s cost of capital), you can use this equation to quickly determine the company’s enterprise value.

To do this, you’ll need some algebra to convert your ratios. For example, if you take Tesla with an enterprise to EBITDA ratio of 36x, that means the enterprise value of Tesla is 36 times higher than its EBITDA.

If you look at the growing perpetuity formula and use EBITDA as the cash flow and enterprise value as what you’re trying to solve for in this equation, then you know that whatever you’re dividing EBITDA by is going to give you an answer that is 36 times the numerator.

To find the enterprise value to EBITDA ratio, use this formula: enterprise value equals EBITDA divided by one over ratio. Plug in the enterprise value and EBITDA values to solve for the ratio.

Enterprise Value = EBITDA / (1 / Ratio)

In other words, the denominator needs to be one thirty-sixth, or 2.8 percent. If you repeat this example with Ford, you would find a denominator of one-fifteenth, or 6.7 percent. For GM, it would be one-sixth, or 16.7 percent.

Plugging it back into the original equation, the percentage is equal to the cost of capital. You could then imagine that Tesla might have a cost of capital of 20 percent and a growth rate of 17.2 percent.

The ratio doesn't tell you exactly, but one thing it does highlight is that the market believes Tesla's future growth rate will be close to its cost of capital. Tesla's first quarter sales were 69 percent higher than this time last year.

The Power of Growth

In finance, growth is powerful. It explains why a smaller company like Tesla carries a high enterprise value. The market has taken notice that, while Tesla is much smaller today than Ford or GM in total enterprise value and revenues, that may not always be the case.

If you want to advance your understanding of financial concepts like company valuation, explore our six-week online course Leading with Finance and other finance and accounting courses to discover how you can develop the intuition to make better financial decisions.

This post was updated on April 22, 2022. It was originally published on April 21, 2017.

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Buying and Selling a Business | Calculators

Business Valuation Calculator: How Much Is Your Business Worth?

Published November 19, 2019

Published Nov 19, 2019

WRITTEN BY: Robert Newcomer-Dyer

A business valuation calculator helps buyers and sellers determine a rough estimate of a business’s value. Two of the most common business valuation formulas begin with either annual sales or annual profits (also known as seller discretionary earnings), multiplied by an industry multiple. Both methods are great starting points to accurately value your business.

For a more in-depth analysis, which can help maximize your payout when selling your business, consider working with a business valuation provider like Guidant. For $495, a dedicated valuation specialist at Guidant will provide a detailed business valuation, financing assessment, and in-depth industry report.

Visit Guidant

Factors That Go Into A Business Valuation

The factors most brokers will take into account when assessing your business include:

• Growth trends
• Website traffic (if significant to your business model)
• Age of business
• Online and offline sales network
• Business model
• Competitors
• Company assets

Getting a ballpark value by using the business valuation calculator above will be useful to buyers, sellers, brokers, and other parties who need a quick estimate. However, you may want a more detailed analysis of what your business is worth, instead of just a thumb in the air estimate. In order to get that you’ll have to find a professional, which often can cost tens of thousands of dollars.

Many business brokers offer a free business valuation to business owners that are ready to sell their business, especially those businesses with net cash flow above $100,000. These valuations will take significantly more information into account than most business valuation calculators, increasing their accuracy.

Tangible Assets vs Intangible Assets

While not included in our business valuation calculator, tangible and intangible assets are both critical pieces of the business valuation puzzle. Tangible assets such as commercial real estate, equipment, and inventory all have the potential to increase the value of a business; and businesses that lack these tangible assets may have a lower value compared to counterparts.

Some intangible assets are difficult to put a price tag on, but they should be valued. A business broker or mergers and acquisitions (M&A) expert with deal-making experience can help determine the value of these assets. An accurate valuation will help you set a price for your business as well as play a significant role in the type of financing options a potential buyer may have.

How To Use The Business Valuation Calculator

If you’re buying a business, this business valuation calculator is designed to tell you whether you can afford to purchase the business and whether the business is worth its asking price. If you’re a seller, the calculator is a reality check. Essentially it gives you an estimation of the price you can charge if you want to attract potential buyers.

Here’s a simple breakdown of how to use the valuation calculator properly:

Business Valuation Calculator Inputs

The inputs in the calculator are the boxes where you must add information about your business. Below we analyze what you should include in each category.

Select the industry to which the business you’re buying or selling belongs. If the exact industry is not there, choose the closest match. This is an important step because the multiplier that the calculator uses to come up with the final valuation will vary based on the industry the business belongs to.

For example, a restaurant with $100,000 in sales or profits will be valued less than a medical practice with the same sales or profits. This is because a medical practice will typically be more stable and have a higher long-term success rate than a restaurant.

Last 12 Months Sales

Type in the business’s sales over the last 12 months. This can be found by looking at the latest income statement. Sales are the revenue that the business generates before subtracting any expenses.

Last 12 Months Profits + Owner’s Salary

Profit is your revenue minus expenses. You can find this number on the business’s latest profit and loss statement . Add in the owner’s salary as well before inputting this number into the calculator.

Business Valuation Calculator Outputs

The outputs are the fields provided after calculations are complete, and display the potential value of the business. The business valuation calculator only has two output fields.

Business Value Based on Sales

Our calculator will give you an approximate value for your business by taking the annual sales and multiplying it by the appropriate industry multiplier. For example, if you are selling a law firm that made $100,000 in annual sales, the industry sales multiplier is 1.03, and the approximate value is $100,000 (x) 1.03 = $103,000.

Business Value Based on Profits + Owner’s Salary

Our calculator will also give you an approximate value for your business by taking the annual profit and multiplying it by the appropriate industry multiplier. Taking the same example of a law firm, suppose the profits were $40,000. The industry profit multiplier is 1.99, so the approximate value is $40,000 (x) 1.99 = $79,600.

Note that there will always be a discrepancy between the business value based on sales and the business value based on profits. The two numbers give you an approximate range of potential values for your business. For some small businesses, the profit-based number will be more accurate because the business may have a lot of sales but also a lot of operating expenses. This means the ultimate profit potential of the business is quite low.

Business Valuation Calculator Formula

There are many ways to value a business , and which method is most reliable will depend on the annual revenue of the business as well as how much data is available, among other factors. In addition to multiples of annual sales and annual profits, which we’ve included in our calculator, business owners may wish to consider other methods such as market-based and asset-based valuation approaches.

Annual Sales Multiple Formula

Business Valuation = Annual sales x industry multiple

Seller’s Discretionary Earnings (SDE) Multiple Formula

SDE Valuation = (Annual profits + owner’s salary) x industry multiple

When to Consider Using a Business Valuation Expert

A business valuation expert can help sellers obtain the best price for their business while also ensuring that the sales price is based on strong data. The case for using a business valuation expert depends on a number of different factors, including the size of the business, the complexity of its operations, and the industry and market factors that influence its growth.

Why Use a Pro

“Valuation is all about analyzing the company’s ability to produce future cash flow, combined with what the market value for their business is selling for. The short-term goal to selling a business is to increase sales and profit, but valuation is a combination of where the business is right now and where it could go.” —Jock Purtle, Founder of Business Exits

Tips For Sellers

If you’re looking to get a business valuation so that you can sell your business, then you’ll likely want to know how to maximize the sale price.

Our top three tips to help you maximize the value of your business are:

1. Prepare for the Sale

Start preparing long before you put the business up for sale. Get your books in order, and make sure there aren’t any accounting or reporting mistakes. These can slow down the sale process, and make it difficult to maximize your value. The fewer things that look wrong when your business is analyzed, the easier it will be to get to closing.

Also, when you’re ready to sell, make sure you have the right documentation ready to go before approaching a business broker. This will speed up your process, and give the broker more confidence that they can count on you being ready when you need to provide more information to them later.

The documents business owners should have ready are:

• 2+ years of business tax returns
• Current P&L (profit and loss statement)
• Current balance sheet

2. Use a Business Broker

Using a broker not only will set your expectations at an acceptable level, but it could also make or break your entire sale. An experienced broker will be able to maximize the value in your sale and get you the largest sum possible for your business. Brokers are often able to get much larger sale amounts than you’re able to get on your own.

Choosing the best business broker for your situation also takes away many of the headaches that would otherwise fall on you. Try outsourcing to a business broker like VNB Business Brokers so they can handle the administrative work, marketing your business for sale, communications with potential buyers, and negotiating both sales prices and final contract terms.

One free consultation with VNB will provide you with answers to questions like:

• What is my business worth?
• Can the valuation price be increased?
• How long will it take to sell my business?
• What’s the next step?

Meanwhile, you can stay focused on operating your business, and continuing to maximize its value until it’s time to sell. Click below to schedule your free consultation today.

Visit VNB Business Brokers

3. Don’t Let Your Emotions Impact the Sale

Your business can feel like an old childhood friend, or even a family member, because of the amount of time you’ve spent working in it. You’ve likely poured your heart and soul into making the business what it is today. However, according to Jock, “The market is the market.”

This means that your business is going to get the value that the market dictates based on your performance, the current economy, and the industry. Being emotional about what potential buyers value your business at isn’t going to help you get to closing. Put yourself in the buyer’s shoes, and don’t get emotional if you want a smooth sales process at a maximum price.

3 Tips For Buyers

Buying a business can often be even more complicated than selling, because you may not be familiar with the industry or business which you’re buying. Many buyers start out with no clear understanding of the type of business they would like to own, and wind up doing research on the fly. Buyers should research industries that they are interested in to determine future potential, while avoiding contracting markets.

The three tips to keep in mind as you look for the right business to purchase are:

1. Find an Industry with Potential

While you may pay more for a business in an industry with high multiples, it’s also more likely to hold its value. This means that when you’re ready to sell the business in the future you should still be able to get a higher sales price for it, especially if you choose an industry with high future growth potential.

2. Ask for Seller Financing

Seller financing is when the seller gives you a loan for part of the purchase price. This can lower the financing amount you need to close the transaction, and you’ll typically get it at a cheaper cost than you would if you received a business acquisition loan for the whole purchase price. Seller financing is common for small business transactions, but you should determine early on in the process whether or not it’s available from the seller.

3. Hire a Business Broker

Hiring a business broker is not quite like hiring a real estate agent. Brokers are compensated by the seller, and may not have an incentive to work with buyers directly, preferring instead to let buyers choose the listings they’re interested in. This doesn’t mean brokers will not work with buyers, but rather that they may not be well suited to show the buyer listings that make sense, as they typically list only a small handful of businesses.

A good business broker can also access many more business opportunities than you can by yourself due to their experience and extensive network. A good place to start is with a nationwide business broker network, where listings are shared between brokers across the country. Some brokers may charge an upfront fee for assisting buyers, and in return provide valuation and negotiation services in addition to help finding the right business.

Pros and Cons of Using a Business Valuation Calculator

Using a business valuation calculator is a fast and simple way to get a ballpark value of a business without hiring an expert and with minimal effort; however, it’s not without its disadvantages. Our business valuation calculator doesn’t factor in tangible and intangible assets which can both significantly impact a business’s actual value.

Some of the pros of using a business valuation calculator are:

• Quick and simple: A business valuation calculator can be used as a quick and easy tool to ballpark a business’s value, which can be especially useful when comparing many like businesses to each other.
• Valuation varies by industry: Most business valuation calculators include an average industry multiple in the calculation, which is useful as not all industries have the same risks and opportunities, which can significantly impact a business’s value.
• Based on revenue and profits: By focusing on actual revenues and profits generated by a business, our valuation calculator is based on a business’s bottom line, which is how much money a business generates notwithstanding assets and liabilities.

Some of the cons of using a business valuation calculator are:

• Doesn’t include assets: Our valuation calculator excludes tangible and intangible assets, which can make up a significant portion of the actual value of a business in asset-heavy industries. It should be combined with a valuation method that includes assets.
• Not a market-based approach: For some businesses, bullish market trends may indicate a much stronger valuation. Conversely, for businesses operating in a contracting market, this approach may overinflate the value of the business’s future revenues.
• Excludes expert analysis: The biggest flaw in any math-based valuation method is the absence of expert analysis. No two businesses are exactly alike, and a math-based calculation ignores factors like intangible assets and year-over-year growth.

Bottom Line

The most important thing in a business acquisition, whether you’re a buyer or a seller, is to arrive at a fair price for the business. This involves several factors not taken into account by a business valuation calculator, however, it can serve as a good starting point. From there you will want to choose a detailed valuation method and determine whether to hire an expert or perform the valuation yourself.

About the Author

Find Robert On LinkedIn

Robert Newcomer-Dyer

Robert has over 15 years of experience in sales leadership, finance, and business development. He recently spent six years leading a team of small business financing professionals, facilitating the deployment of critical capital to over 9,000 small businesses across the US.

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Here's How to Value a Company [With Examples]

Published: May 24, 2023

What's your company worth? It's an important question for any entrepreneur , business owner , or potential investor.

What's more, knowing how to value your business becomes increasingly important as it grows, especially if you want to raise capital, sell a portion of the business, or borrow money. 

Here, we'll take a look at different factors to consider when valuing your business, common equations you can use, and high-quality tools that will help you crunch the numbers.

Table of Contents

How to value a business.

Public vs. Private Valuations

Business Valuation Methods

Business Valuation Calculators

Company valuation example, what is a business valuation.

As the name suggests, a business valuation determines the value of a business or company. During the process, all areas of a business are carefully analyzed, including its financial performance, assets and liabilities, market position, and future growth potential.

Ultimately, the goal is to arrive at a fair and objective estimate which can be useful in making business decisions and negotiating.

• Company Size
• Profitability
• Market Traction and Growth Rate
• Sustainable Competitive Advantage
• Future Growth Potential

1. Company Size

Company size is a commonly used factor when valuing a company. Typically, the larger the business, the higher the valuation will be. This is because smaller companies have little market power and are more negatively impacted by the loss of key leaders. In addition, larger businesses likely have a well-developed product or service and, as a result, more accessible capital.

2. Profitability

Is your company earning a profit?

If so, this a good sign, as businesses with higher profit margins will be valued higher than those with low margins or profit loss. The primary strategy for valuing your business based on profitability is through understanding your sales and revenue data. 

Valuing a Company Based On Sales and Revenue

Valuing a business based on sales and revenue uses your totals before subtracting operating expenses and multiplying that number by an industry multiple. Your industry multiple is an average of what businesses typically sell for in your industry so, if your multiple is two, companies usually sell for 2x their annual sales and revenue.

3. Market Traction and Growth Rate

When valuing a company based on market traction and growth rate, your business is compared to your competitors. Investors want to know how large your industry market share is, how much of it you control, and how quickly you can capture a percentage of the market. The quicker you reach the market, the higher your business’ valuation will be.

4. Sustainable Competitive Advantage

What sets your product, service, or solution apart from competitors? 

With this method, the way you provide value to customers needs to differentiate you from the competition. If this competitive advantage is too difficult to maintain over time, this could negatively impact your business' valuation. 

A sustainable competitive advantage helps your business build and maintain an edge over competitors or copycats in the future, pricing you higher than your competitors because you have something unique to offer.

5. Future Growth Potential

Is your market or industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of your business. If investors know your business will grow in the future, the company valuation will be higher. 

The financial industry is built on trying to accurately define current growth potential and future valuation. All the characteristics listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.

Depending on your type of business, there are different metrics used to value public and private companies.

Public Versus Private Valuation

Public Company Valuation

For public companies, valuation is referred to as market capitalization (which we’ll discuss below) — where the value of the company equals the total number of outstanding shares multiplied by the price of the shares.

Public companies can also trade on book value, which is the total amount of assets minus liabilities on your company balance sheet. The value is based on the asset’s original cost less any depreciation, amortization, or impairment costs made against the asset.

Private Company Valuation

Private companies are often harder to value because there's less public information, a limited track record of performance, and financial results are either unavailable or might not be audited for accuracy.

Let's take a look at the valuations of companies in three stages of entrepreneurial growth.

1. Ideation Stage

Startups in the ideation stage are companies with an idea, a business plan, or a concept of how to gain customers, but they're in the early stages of implementing a process. Without any financial results, the valuation is based on either the track record of the founders or the level of innovation that potential investors see in the idea.

A startup without a financial track record is valued at an amount that can be negotiated. Most startups I've reviewed created by a first-time entrepreneur start with a valuation between $1.5 and $6 million.

All the value is based on the expectation of future growth. It's not always in the entrepreneur’s best interest to maximize its value at this stage if the goal is to have multiple funding rounds. The valuation of early-stage companies can be challenging due to these factors.

2. Proof of Concept

Next is the proof of concept stage. This is when a company has a handful of employees and actual operating results. At this stage, the rate of sustainable growth becomes the most crucial factor in valuation. Execution of the business process is proven, and comparisons are easier because of available financial information.

Companies that reach this stage are either valued based on their revenue growth rate or the rest of the industry. Additional factors are comparing peer performance and how well the business is executing in comparison to its plan. Depending on the company and the industry, the company will trade as a multiple of revenue or EBITDA (earnings before interest, taxed, depreciation, and amortization).

3. Proof of Business Model

The third stage of startup valuation is the proof of the business model. This is when a company has proven its concept and begins scaling because it has a sustainable business model.

At this point, the company has several years of actual financial results, one or more products shipping, statistics on how well the products are selling, and product retention numbers.

Depending on your company, there are a variety of equations to use to value your business.

Company Valuation Methods

Let’s take a look at some of the formulas for business valuation. 

Market Capitalization Formula

Market Value Capitalization is a measure of a company’s value based on stock price and shares outstanding. Here is the formula you would use based on your business’ specific numbers: 

Multiplier Method Formula

You would use this method if you’re hoping to value your business based on specific figures like revenue and sales. Here is the formula: 

Discounted Cash Flow Method

Discounted Cash Flow (DCF) is a valuation technique based on future growth potential. This strategy predicts how much return can come from an investment in your company. It is the most complicated mathematical formula on this list, as there are many variables required. Here is the formula: 

Image Source

Here are what the variables mean: 

• CF = Cash flow during a given year (can include as many years as you’d like, simply follow the same structure).
• r = discount rate, sometimes referred to as weighted average cost of capital ( WACC ). This is the rate that a business expects to pay for its assets.

This method, along with others on this list, requires accurate math calculations. To ensure you’re on the right track, it may be helpful to use a calculator tool. Below we’ll recommend some high-quality options. 

Below are business valuation calculators you can use to estimate your companies value.

This calculator looks at your business' current earnings and expected future earnings to determine a valuation. Other business elements the calculator considers are the levels of risk involved (e.g., business, financial, and industry risk) and how marketable the company is.

2. EquityNet

EquityNet's business valuation calculator looks at various factors to create an estimate of your business’s value. These factors include:

• Odds of the business' survival
• Industry the business operates in
• Assets and liabilities
• Predicted future revenue
• Estimated profit or loss

3. ExitAdviser

ExitAdviser's calculator uses the discounted cash flow (DCF) method to determine a business’s value. To determine the valuation, "it takes the expected future cash flows and ‘discounts' them back to the present day.”

It may be helpful to have an example of company valuation, so we’ll go over one using the market capitalization formula displayed below: 

Shares Outstanding x Current Stock Price = Market Capitalization

For this equation, I need to know my business’s current stock price and the number of outstanding shares. Here are some sample numbers: 

Shares Outstanding: $250,000

Current Stock Price: $11

Here is what my formula would look like when I plug in the numbers:

250,000 x 11 

Based on my calculations, my company’s market value is 2,750,000.

Back to You

Whether you’re looking to borrow money, sell a portion of your company, or simply understand your market value, understanding how much your business is worth is important for your business’ growth.

Don't forget to share this post!

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Business Valuation

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on February 26, 2024

Get Any Financial Question Answered

Table of contents, what is business valuation.

Business valuation is the process of estimating the economic value of a business or its ownership interest which involves taking into account its financial performance, assets, liabilities, and other relevant factors.

Business valuation is crucial for several reasons, including providing an accurate understanding of a company's value, facilitating informed decision-making, and ensuring transparency in financial transactions like mergers and acquisitions, sales, taxation, and legal disputes.

An accurate business valuation can help business owners and investors make strategic decisions about growth, financing, and exit strategies.

Additionally, business valuation is often required for legal purposes, such as taxation, estate planning, and dispute resolution. In these cases, a thorough and accurate valuation can help ensure compliance with legal requirements and protect the interests of all parties involved.

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I'm Taylor Kovar, a Certified Financial Planner (CFP), specializing in helping business owners with strategic financial planning.

In my early consulting days, I encountered a family-run bakery facing a difficult decision regarding selling their business. Their uncertainty about the value of their business was compounded by emotional attachments. By conducting a thorough cash flow analysis, we were able to identify and highlight less obvious aspects of value, such as their unique recipes and loyal customer base. Adjusting their valuation to take these intangibles into account, they were able to secure a deal that surpassed their expectations.

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Methods of Business Valuation

Asset-based approach.

The asset-based approach to business valuation focuses on determining the value of a company based on the value of its tangible and intangible assets .

This approach involves identifying and valuing the company's assets , then deducting its liabilities to arrive at the net asset value . The asset-based approach is particularly useful for companies with significant assets, as well as for those in financial distress or facing liquidation.

However, this approach has its limitations, as it does not take into account the company's future earnings potential or the value of its intangible assets, which may be significant for some businesses.

Income-Based Approach

The income-based approach to business valuation focuses on estimating the company's value based on its ability to generate future cash flows or profits .

This approach involves projecting the company's future earnings, then discounting those earnings to their present value using a discount rate that reflects the risks associated with the company's operations.

The income-based approach is often used for valuing companies with strong growth prospects or those that derive a significant portion of their value from their ability to generate future cash flows.

However, this approach relies heavily on assumptions about future earnings and can be subject to significant uncertainty and subjectivity.

Market-Based Approach

The market-based approach to business valuation estimates the value of a company by comparing it to similar businesses in the market.

This approach involves analyzing comparable companies or transactions to determine valuation multiples, such as price-to-earnings or price-to-sales ratios , which are then applied to the company being valued.

The market-based approach is useful for valuing companies in well-established industries with a large number of comparable businesses or transactions. However, it may not be suitable for companies in niche markets or industries with limited comparables.

Factors Considered in Business Valuation

Revenue and profitability.

Revenue and profitability are critical factors in determining a company's value, as they reflect the company's ability to generate income and maintain sustainable growth.

A company with consistently strong revenue and profitability is likely to be valued more highly than a company with weaker financial performance.

In business valuation, analysts typically review historical financial statements to assess a company's revenue and profitability trends, as well as to identify any anomalies or patterns that may impact the company's value.

Assets and Liabilities

A company's assets and liabilities play a significant role in its valuation , as they represent the resources available to generate income and the obligations that must be met.

Assets, both tangible and intangible, can contribute to a company's overall value, while liabilities can reduce it.

In the valuation process, analysts review a company's balance sheet to identify and value its assets and liabilities, taking into account factors such as depreciation , market conditions, and potential future growth or decline in asset values.

Cash flow is a critical factor in business valuation, as it represents the company's ability to generate cash from its operations, which can be used to fund growth, pay dividends , or meet debt obligations.

A company with strong, consistent cash flows is generally considered more valuable than a company with volatile or weak cash flows.

Analysts typically examine a company's cash flow statement to assess its cash generation and use patterns, as well as to identify any potential issues or opportunities that may impact its value.

Industry and Market Conditions

Industry and market conditions can have a significant impact on a company's value, as they influence factors such as demand for products or services, competitive dynamics, and regulatory environment.

A company operating in a growing industry with strong market demand may be valued more highly than a company in a stagnant or declining industry.

During the valuation process, analysts consider the company's industry and market conditions, as well as any trends or external factors that may influence its future performance and value.

Management and Employee Quality

The quality of a company's management and employees can also impact its value, as it influences the company's ability to execute its strategies, adapt to changes, and maintain a competitive edge.

Companies with strong, experienced management teams and skilled employees are often valued more highly than those with weaker leadership or workforce capabilities.

In business valuation, analysts may assess the company's management and employee quality through factors such as executive and employee backgrounds, turnover rates, and organizational structure .

Intellectual Property and Patents

Intellectual property (IP) and patents can significantly contribute to a company's value, particularly in industries such as technology, pharmaceuticals, or creative sectors, where innovation and unique assets are critical.

Companies with strong IP portfolios or valuable patents are often valued more highly than those with limited or less valuable IP assets.

During the valuation process, analysts may assess the value of a company's IP and patents by considering factors such as the potential future cash flows generated from those assets, the competitive advantages provided, and the remaining life of the patents.

Types of Business Valuation

Fair market value.

Fair market value is a type of business valuation that estimates the price at which a company would change hands between a willing buyer and a willing seller, with both parties having reasonable knowledge of the relevant facts and neither being under any compulsion to buy or sell.

This is often used in legal contexts, such as taxation and estate planning, as well as for setting transaction prices in business sales or acquisitions .

Investment Value

Investment value is a type of business valuation that estimates the value of a company to a specific investor, taking into account the investor's unique circumstances, objectives, and risk tolerance .

This type of valuation may differ from the fair market value, as it reflects the individual investor's perspective rather than the broader market.

Investment value is often used by investors when evaluating potential investments or determining the value of their existing holdings in a company.

Liquidation Value

Liquidation value is a type of business valuation that estimates the net amount a company would realize if it were to sell its assets and settle its liabilities immediately.

Liquidation value is typically lower than other types of valuation, as it assumes a rapid sale of assets, often at a discount to their fair market value.

This is often used in situations where a company is facing financial distress or bankruptcy and needs to quickly monetize its assets to satisfy its obligations.

Uses of Business Valuation

Sale of business.

Business valuation is essential in the sale of a business, as it provides an objective estimate of the company's worth, which can be used as a basis for negotiating the transaction price.

A thorough and accurate valuation can help business owners ensure they receive a fair price for their company and enable potential buyers to make informed decisions about the investment.

Mergers and Acquisitions

In mergers and acquisitions , business valuation plays a crucial role in determining the value of the target company and assessing the potential benefits and risks of the transaction.

A comprehensive valuation can help acquirers identify synergies, assess the target company's financial health, and determine a fair offer price.

Likewise, for the target company, a thorough valuation can help its owners understand their company's worth and negotiate favorable terms in the transaction.

Taxation and Estate Planning

Business valuation is often required for taxation and estate planning purposes, such as determining the value of a company for tax reporting, gift tax , or inheritance tax purposes.

An accurate valuation ensures compliance with tax regulations and helps business owners and their heirs plan for future tax obligations.

In estate planning , business valuation can also assist business owners in developing succession plans and strategies to preserve and transfer their company's value to future generations.

Litigation and Dispute Resolution

In litigation and dispute resolution, business valuation is often necessary to determine damages, quantify losses, or assess the value of a company in the context of legal disputes, such as shareholder disputes, divorce proceedings, or contractual disputes.

A thorough and accurate business valuation can help parties in a dispute reach a fair resolution and support their legal claims or defenses.

Business Valuation Process

Preparing for valuation.

Before beginning the business valuation process, it is essential to gather all necessary information about the company, including its financial statements , business plan, and other relevant documents.

This information will be used to analyze the company's financial performance , assets, and liabilities, as well as to assess its growth prospects and industry position.

It is also crucial to engage the services of a qualified business valuation professional or firm, who can provide an objective, expert assessment of the company's worth.

Selecting a Valuation Method

Once the necessary information has been gathered, the next step is to select the appropriate valuation method based on the company's characteristics and the purpose of the valuation.

The choice of method will depend on factors such as the company's industry, size, growth prospects, and the availability of comparable transactions or companies.

The selected valuation method should be appropriate for the company's unique circumstances and provide an accurate, objective estimate of its worth.

Collecting and Analyzing Data

After selecting a valuation method, the next step is to collect and analyze the relevant data, such as financial statements, industry reports, and market data.

This analysis will inform the valuation process by providing insights into the company's financial performance, market position, and growth prospects. The data analysis should be thorough and accurate to ensure a reliable valuation.

Applying Discounts and Premiums

In some cases, it may be necessary to apply discounts or premiums to the company's valuation to account for factors such as liquidity , marketability, or control. Discounts and premiums should be applied judiciously, based on objective criteria and supported by empirical evidence.

Finalizing Valuation Report

Once the valuation process is complete, the valuation professional or firm will prepare a comprehensive valuation report that outlines the methodology, data, and assumptions used in the valuation, as well as the final valuation result.

This report should be clear, well-organized, and supported by relevant data and analysis.

The Bottom Line

Business valuation is the process of estimating a company's worth by analyzing its financial performance, assets, liabilities, and other relevant factors. It is essential for various purposes, including sales, mergers and acquisitions, taxation, and legal disputes.

There are several methods of business valuation, including asset-based, income-based, and market-based approaches. Each method has its unique characteristics and is suitable for different situations and types of businesses.

The choice of the valuation method depends on factors such as the company's industry, size, growth prospects, and the availability of comparable transactions or companies.

Various factors are considered in business valuation, including revenue and profitability, assets and liabilities, cash flow, industry and market conditions, management and employee quality, and intellectual property and patents.

Understanding the different valuation methods, factors, and types of valuation can help business owners, investors, and other stakeholders navigate the complex world of business valuation and ensure that they have an accurate, objective assessment of a company's value.

Business Valuation FAQs

What is business valuation.

Business valuation is the process of determining the economic value of a business or company.

What are the methods used in business valuation?

There are three methods used in business valuation: asset-based approach, income-based approach, and market-based approach.

What factors are considered in business valuation?

The financial factors considered in business valuation include revenue and profitability, assets and liabilities, and cash flow. Non-financial factors include industry and market conditions, management and employee quality, and intellectual property.

What are the types of business valuation?

The three types of business valuation are fair market value, investment value, and liquidation value.

What are the uses of business valuation?

Business valuation is used for a variety of purposes, including the sale of a business, merger and acquisition, taxation and estate planning, and litigation and dispute resolution.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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Run » finance, what is a business valuation and how do you calculate it.

There are multiple ways to find the economic value of your business, with different calculations that can be used for different purposes.

How do you put a price on the time, effort and passion you’ve put into building a successful small business? It can be hard to objectively assess how much your venture is worth after putting so much work in over the years. This is where business valuation calculations, ideally handled by a third-party expert, can play a role. Business valuations are used for mergers, acquisitions, tax purposes and more. Here’s how business valuations work and how to calculate the economic value of your company.

[Read more: 3 Things to Consider When Selling a Business During a Pandemic ]

What is a business valuation?

A business valuation assesses the economic value of part or all of a business. Business valuations are used in a number of circumstances, including to determine the sale value of a business, to establish partner ownership, for tax purposes or even in divorce proceedings.

Generally, the valuation process analyzes all aspects of the business, including the company’s management, capital structure, future earnings and the market value of its assets. In the United States, business valuations are usually carried out by a professional who is Accredited in Business Valuation (ABV). This certification, awarded by the American Institute of Certified Public Accountants, is given to CPAs who pass an exam and meet minimum standards set by the AICPA.

If you’re seeking financing from lenders, investment bankers or venture capitalists, you may need an ABV-certified professional to help carry out your business valuation. If you’re simply looking to understand how much your venture is worth, you can carry out your own analysis using one of the business valuation methods listed below.

[Read more: How to Calculate a Business Valuation ]

Business valuation methods

There are three common methods to evaluating the economic worth of a business. These categories are:

• Asset-based methods : Sum up all of the investments in the company to determine the value of the business.
• Earning value methods : Evaluate the company based on its ability to produce wealth in the future.
• Market value methods : Estimate what the company is worth based on similar businesses that have recently been sold.

In general, try to use more than one method to get the most accurate depiction of your business value.

There are pros and cons to each of these approaches to valuation. An asset-based approach, for instance, works well for corporations in which all assets are owned by the company and will be included in the sale. But, for a sole proprietor, this approach can be more difficult; which assets should be considered personal, versus business-related?

Generally, the two main earning value methods — capitalizing past earnings and discounted future earnings — are used when a company is seeking to buy or merge with another company. Market-value approaches are the least accurate and can lead to a business being under- or overvalued.

How to calculate a business’s value

Often, business valuations are performed by a licensed professional. To find an ABV who can help, look for someone registered with the American Society of Appraisers (ASA).

If you’re simply looking to get a basic idea of what your business is worth, there are a few steps you can take to get a rough estimate. Start by calculating your seller’s discretionary earnings (SDE) . SDE is like EBITDA, with owner’s salary and owner’s benefits added back in. “Start with your pretax, pre-interest earnings. Then, you’ll add back in any purchases that aren’t essential to operations, like vehicles or travel, that you report as business expenses. Employee outings, charitable donations, one-time purchases and your own salary can all be included in your SDE,” wrote NerdWallet .

Once you have your SDE, take stock of your assets, do a little market research to see similar businesses have sold for, and pay attention to industry trends to see if you can ask for a higher valuation.

In general, try to use more than one method to get the most accurate depiction of your business value. “A general rule of thumb in business valuation is that you will want to use multiple methods. Using three to four methods will allow you to estimate fair value with more accuracy,” wrote the experts at The Balance .

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7 Business Valuation Methods: What's Your Company's Value?

Table of contents

Establishing an accurate value of a business, whether you’re on the buy-side or sell-side , is an essential component of extracting value from a transaction.

The most successful investors of all time are those that are better able to value assets .

And while you can add value to a transaction through a successful integration , paying the right price for a company gives you the best platform to do so.

In this article on business valuation, DealRoom borrows from some of the insights into valuation provided by colleagues that contributed to our sister site, M&A Science, as well as DealRoom founder Kison Patel.

What is Business Valuation?

Business valuation, also known as company valuation, is the process through which the economic value of a business is calculated. The purpose of a valuation is to find the intrinsic value of a company - its value from an objective perspective. Business valuations are mostly used by investors, business owners and intermediaries such as investment bankers, who are seeking to accurately value the company’s equity for some form of investment.

Understanding Business Valuation

Although business valuations are *mostly* used to value a company’s equity for some form of investment, this isn’t the only reason to have an understanding of a company’s value.

A company is not unlike most other long-term assets, in that it’s useful to have a handle on how much its worth.

Being in an informed position at all times enables the company’s owners to understand what their options are, how to react in different business situations, and how their company’s valuation fits into the bigger picture.

The objectives for valuing a business can be divided into: internal motives, external motives, and mixed motives (being a combination of internal and external motives).

The Business Valuation Process

The business valuation process differs depending on which method is chosen.

Whatever method is chosen, the aim is the same: To find the company’s intrinsic value.

Depending on the company and or/the individual conducting the business valuation process, the method can differ.

For example, should a company be measured based on its assets, its future free cash flows, recent transactions for comparable companies, or the sum of its real options?

More often than not,  valuation professionals seek to use a combination of these to arrive at an answer.

The valuation methods they use are summarized in the table below

More often than not, business valuation professionals use at least two methods when valuing companies, the most common being the DCF method and comparable transactions.

These methods are popular because they’re widely understood, but also because the underlying numbers are easier to obtain.

In the case of real options valuation, for example, the numbers which underpin the company valuation are far more difficult to objectively ascertain.

Business Valuation Methods

• Discounted Cash Flow Analysis
• Capitalization of Earnings Method
• EBITDA Multiple
• Revenue Multiple
• Precedent Transactions
• Book Value/Liquidation Value
• Real Option Analysis

1. Discounted Cash Flow Analysis

Discounted cash flow analysis uses the inflation-adjusted future cash flows to project a value for the business.

The thinking behind DCF Analysis is that free cash flows are what endow shareholders with value, so FCF is the only number that matters.

The problem then arises of how to accurately project discounted FCF, using a weighted average cost of capital (WACC) several years into the future.

Even small differences in the growth rate, the perpetual growth rate and the cost of capital can lead to significant differences in valuation, fueling criticism of the method.

2. Capitalization of Earnings Method

The capitalization of earnings method is a neat, back-of-the-envelope method for calculating the value of a business, which in fact is used by DCF Analysis to calculate the perpetual earnings (i.e. all those earrings that occur after the terminal year of the DCF Analysis being performed).

Sometimes called the Gordon Growth Model, the Capitalization of Earnings Method requires that the business have a steady level of growth and cost of capital.

The numerator, usually the free cash flow, is then divided by the difference between the discount rate and the growth rate, expressed as fractions to arrive at an approximation of a valuation.

3. EBITDA Multiple

The EBITDA multiplier is an excellent solution to the arbitrary nature of most valuation methods. Even Aswath Damodaran, the father of modern valuation says that any valuation of a business should follow the law of parsimony: the most simple of two (or more) competing theories should hold sway in an argument.

On this basis, the EBITDA multiple - the multiplication of this year’s EBITDA figure by a multiplier agreeable to both the buyer and seller - is an elegant solution to the valuation dilemma.

Even those who consider this method too simplistic tend to use it as a guide for their valuations, underlining its strength.

4. Revenue Multiple

This is essentially the same as the EBITDA Multiplier method with one advantage: It can be used in those circumstances where EBITDA is either negative or isn’t available for some reason (usually because sales figures are the only ones available when researching firms to acquire through online search).

Again, while you might say it’s just a benchmark - others would argue, with some justification, that the total sales of a business is the most important benchmark of all.

5. Precedent Transactions

This method may incorporate the EBITA and revenue multipliers or any other multiple that the practitioner so wishes to use. As the title suggests, here the valuation is derived from comparable transactions in the industry.

So, for example, if widget makers have been trading at multiples of somewhere between 5 and 6 times EBITA (or net income, or whatever indicator is chosen), Widget Co. would establish its value by performing the same iterative process.

The problem that then arises, is how similar are companies to others, even in their own industry?

Thus, for our money, this is more of a barometer of the market than a valuation method per se.

6. Book Value/Liquidation Value

The liquidation value,(which is essentially the same as the book value) is what Warren Buffett claims to have always looked at when seeing if businesses are overvalued on the stock market or not.

The liquidation value is the net cash that a business would generate if all of its liabilities were paid off and its assets were liquidated today.

In a sense, calling this a valuation method for a business is a misnomer - this only gives you the value of part of the business.

But, to paraphrase Buffett, it allows you to see the ‘margin of error’ that you have with a valuation.

The logic goes that, even if everything goes wrong in management and the company’s sales fall dramatically after the acquisition, it can always fall back on the liquidation value.

7. Real Option Analysis

Proponents of real options analysis look at businesses as nothing more than a nexus of real options: the option to invest in opportunities, the option to utilize spare capacity, the option to hire more salespeople, etc.

Bringing together these options is the basis behind real options analysis for valuation.

This is most effective for firms with uncertain futures, usually those who aren’t yet cash generative: startups and mineral exploration firms, for example.

Of the valuation methods on this list, it’s by some distance the most complicated but its proponents include McKinsey and several of the world’s most prestigious business schools.

How to Pick the Right Valuation Method?

The last section mentioned how most business valuation professionals use at least two methods of valuation, and also that the valuation (the output) will ultimately only be as good as the numbers uesd to achieve it (the inputs).

After conducting a preliminary analysis of the company, whoever is conducting the valuation chooses the method, which is most suitable to the business and its industry.

There is no question that the biggest determinant of the valuation method used is available informtion. To take the example of comparable transactions, without any reasonably comparable transactions, there is no way that this valuation method can be conducted.

Here is an example of intangible assets valuation.

Even transactions in the same space from several years before cannot be considered accurate representations of a company’s value in the current environment.

In a similar vein, even the most commonly used valuation method, the DCF method, requires users to forecast free cash flows to a pre-determined point in the future. Only in the most extreme cases - for example, a company with a remarkably small number of clients and pre-agreed contracts - is this feasible.

But information is just one of the factors which should determine which is the right valuation method to choose. The others are as follows:

Type of the company

If a company is asset-light, such as is the case with many service companies, it makes little sense to use the net-asset valuation method. Similarly, if most of a company’s value is in its branding or IP, it may make little sense to use the discounted cash flow method.

Size of the company

Larger companies tend to be applicable for a larger number of valuation methods. Small companies, with less information, are usually only subject to a handful of valuation methods. Bear in mind too that different valuation considerations are at play for each (e.g., higher valuation multiples for larger companies).

Economic environment

Regardless of which method chosen, it’s never a bad idea to consider the economic environment that teh company faces. But in more positive economic conditions, it’s important to be somewhat conservative when valuing in the understanding that all business cycles come to an end.

A further consideration for valuing a company is what the end user requires the valuation for. Some buyers will only look to the value of a company’s fixed assets, be that technology, real estate, or even trucking. Others will only be interested in cash-flow generating potential (as is the case with most buyers of SAAS platforms).

How to carry out a successful valuation

There are a few ways in which a valuation professional can ensure that, whatever the valuation method they choose, they’ll arrive at a number which approximates intrinsic value.

Successful valuation factors are:

A valuation which is heavily influenced by an opinion can be regarded as just that - an opinion.

The valuation should consider as much as possible; not just a company’s assets or its cash flows, but also its environment, and other internal and external factors.

Holistic does not mean detail for the sake of detail. Valuing Amazon doesn’t require making projections about the future prices of cardboard packaging.

Justifiable

Anyone reading the valuation should be able to arrive at the same conclusion as the individual conducting the valuation based on the information provided.

Business valuation providers

Business valuation is the bread and butter of investment banks and M&A intermediaries.

Even if a company has the wherewithal to conduct their own business valuation, it pays to hire a third party specialist for the expertise that they bring to the task. Even legal firms now typically have an in-house valuations expert.

Depending on the valuation method(s) used by the business valuation providers, the company can change the inputs over time to see how their valuation evolves.

Business Valuation: Part art, part science

The minute-by-minute fluctuation of the stock prices reflect the reality that there can never be a true consensus on a company’s valuation: Everybody has their own.

This is also reflected by the analysts’ reports on public companies, all of which suggest a price range, as well as attraching a  ‘buy’, ‘sell’ or ‘hold’ tag to covered stocks. In some cases, the range suggested by the analysts can be as much as 20% of the stock’s current price - hardly a specific valuation.

Blue chip Investment banks, keen to let everybody know that they’re hiring the best quantitative analysts in the world, can also vary widely on price.

The upcoming IPO of British chip manufacturer ARM is a case in point.

The value of the IPO pitched by investment banks has ranged from $30 billion to $70 billion - a massive $40 billion difference. Most of these bankers will be wrong by billions of dollars, illustrating the difficulty of business valuations.

Closing Remarks

Any valuation model is only as useful as the inputs used.

Perhaps what links all of the methods mentioned here is that their users have, at one time or another, plugged numbers into a model which gave a number they thought was erroneous, only to replace the numbers moments later to arrive at a number they considered ‘more reasonable.’

The best advice is to use as many measures as possible to arrive at a valuation, assuming the data are available to you. The more insights you can garner on its revenues, EBITDA, free cash flows, assets and real options, the better a perspective you gain of the company’s true value.

DealRoom makes the M&A process seamless and efficient. Whether you're a first-time acquirer or a seasoned M&A professional, DealRoom has something for everyone. Whether you need an advanced M&A pipeline tool to enable pipeline management and reporting or a data room software, talk to DealRoom today.

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Business Valuation for Investors: Definition and Methods

What business valuations are and how to do them

What Is Business Valuation?

Why you would need to do a business valuation, business valuation methods, what business valuation means to investors, frequently asked questions (faqs).

Klaus Vedfelt / Getty Images

A business valuation is how the story of a company, its history, brand, products, and markets, is translated into dollars and cents. Valuations are used by investors, owners, bankers, and creditors, as well as the IRS, and the process can have very different results depending on the objective. Accurately calculating value is both an art and a science.

Here’s an overview of the how, why, and who of business valuations.

Key Takeaways

• All business valuations are estimates of economic value.
• A business valuation is influenced by who does it and why.
• Pricing and valuation are not the same thing.

Business valuation can be described as the process or result of determining the economic value of a company. All businesses have one thing in common: The goal is to generate profits for shareholders. Time frames, methods, and expectations differ, but the goal is the same.

Ultimately, the value of any business is the present value of expected future profits. The valuation process looks in depth at the operation, expenses, revenues, strategy, and risks of the business to arrive at assumptions for future earnings, time horizon, discount rates, and growth rates.

All business valuations are estimates. The objective of the valuation, and who does the analysis, heavily influences the end result. Investment bankers valuing a company to take it public want to justify the highest number possible, while accountants valuing a company for tax purposes want to arrive at the lowest number possible.

Valuation is different from pricing. Valuation is intrinsic; it’s based on the actual performance of the business. Pricing results from supply and demand; it incorporates market influences such as overall direction of prices, other investors, and new information such as rumors and news.

For an owner who may be looking for financing, considering a sale, or updating a financial plan, here are some common reasons for a business valuation.

Merger, Acquisition, and Financing Transactions

Valuations are fundamental to negotiations for the sale, purchase, or merger of a business. Valuations are used to benchmark buy-ins and buy-outs for partners and shareholders. Lenders and creditors often require valuations as a condition for financing. Valuations are also used to establish and update employee stock ownership plans (ESOPs).

Tax and Succession Planning

Valuations determine estate and gift tax liabilities and have an important role in retirement planning. Tax and succession valuations follow IRS guidelines.

Valuations are also often central to divorce proceedings, resolving partnership disputes, and settlements for legal damages.

Strategic Planning

The in-depth analysis of a business valuation can help owners better understand drivers of growth and profit.

The valuation method used depends on the condition of the business and the purpose of the valuation. The discounted cash-flow method is generally used for healthy companies generating a profit.

Discounted Cash Flow

The discounted cash flow method determines the present value of future profits, or earnings. The discount rate reflects the potential risk of the business not meeting profit expectations. A higher discount rate results in a lower value, which reflects a greater risk posed by the business. There are variations of the discounted cash flow method that use dividends, free cash flow, or other measures instead of earnings. The discounted cash flow method usually calculates the present value of five years of earnings adjusted for growth, and future earnings beyond five years (known as terminal value).

Net Asset, or Book, Value

The net asset value, also known as book value, is the fair market value of the business assets minus total liabilities on its balance sheet. Investors and lenders will consider net asset value for younger companies with limited financial histories. Net asset value is also useful as a lower limit for a valuation range, as it only measures a business’s tangible assets .

Liquidation Value

Liquidation value is the net asset value discounted for a distressed sale. Investors and lenders may consider liquidation value for younger or potentially distressed companies.

Market Value

The market value method is a relative method. It compares a company with its peers and within its industry to arrive at a value by using multiples like price-to-earnings ratio (P/E) . For example, one could value the Really Cool Fans Co. by applying an average P/E multiple for appliance stores to the company’s earnings like this:

Value = Price / Earnings Multiple 25 x earnings $120,000 = $3,000,000

The problem with using a relative method is that it incorporates any errors the market makes in valuing comparable companies as well as in the overall direction of prices.

Valuing a business is a complex process, and there aren’t any shortcuts. For the average investor, research reports can offer insights into a company’s value. The business valuation process is an in-depth analysis, yet at the same time, it’s only an estimate. 

A basic understanding of the valuation methods, however, can help you clarify your investment philosophy and strategy.

A true value investor analyzes stocks independently of the market, and looks for gaps between value and price. They believe that over time, price will catch up with value. Price investors look for market trends in the demand for a stock using technical analysis , then try to get ahead of those trends.

Efficient-market investors believe the market accurately reflects value. Value and price investors use active management styles, by selecting specific stocks with a goal of outperforming the market. Efficient market investors use passive investment styles, such as index funds.

Is the date of a business valuation important?

Yes, valuations for financial reporting and tax purposes have to be completed by a deadline. Valuations for mergers and acquisitions , financing, and other transactions have to meet the requirements of the parties involved.

What are the elements of a business valuation?

A business valuation can be thought of in terms of “why,” “how,” and “who.”

• Why is the objective of the valuation. Valuations done for different purposes will probably yield different results. 
• How is the valuation method selected. Different methods will produce different results.
• Who is the person or firm performing the valuation. Their experience and philosophy will influence the results.

What are common mistakes when valuing a business?

For the average investor, the biggest mistake is confusing pricing with valuation. Pricing considers demand, and valuation doesn’t. Pricing and valuation are both used to make investment decisions, but they’re different.

IRS. " IRS Revenue Ruling 59-60 ."

Patrick L. Anderson, Ilhan K. Geckil, and Nicole Funari. " The Three Essential Factors in Estimating Business Value or Commercial Damages ." AEG Working Paper 2007-1 .

National Association of Certified Valuators and Analysts. " Chapter Six - Commonly Used Methods of Valuation ." Page 7.

National Association of Certified Valuators and Analysts. " Chapter Six - Commonly Used Methods of Valuation ." Page 13.

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Using a Business Valuation for a Business Plan

Mar 5, 2024 | Business Appraisal , Business Plan , Business Valuation

Whether you are starting , buying , expanding , or selling a business , it is important to have a strong business plan. A business plan is a document that outlines a business’s goals, strategies, operations, and financial projections. This document serves as a roadmap to help business owners succeed. If you are looking to create or strengthen a business plan, it is helpful to obtain a business valuation . As part of a business valuation for a business plan, operators gain crucial insights into a business’s risks, opportunities, and financial health. 

Peak Business Valuation is happy to help! As a business appraiser, Peak values thousands of businesses throughout the United States. We can provide you with a business valuation for a business plan. In addition, Peak Business Valuation can discuss any questions you may have on business plans and valuing a business. Start now by scheduling a free consultation with Peak Business Valuation below! 

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Creating a Business Plan

Creating a business plan involves several steps. This can include conducting market research, setting goals, outlining the specifics of products and services, creating financial projections, etc… Business owners can enhance this process by receiving a business valuation for a business plan. During a business valuation, valuation experts analyze the financial standing of your business. In addition, business appraisers conduct a thorough risk assessment and provide business owners with a valuation report. 

In the following paragraphs, we discuss how to use a business valuation to create a strong business plan. For more information, see Creating a Strong Business Plan . 

Understanding the Value of a Business

First, understanding the true value of a business helps operators make decisions about resource allocation, growth opportunities, and potential risks. This also ensures that your goals are aligned with your business’s current value. As such, a business valuation provides a strong foundation for your business plan. To learn more, schedule a free consultation with Peak Business Valuation ! 

Setting Realistic Goals

Next, to set realistic financial goals, you need to understand the current value of your business. As such, a business valuation for a business plan plays an important role in goal setting. In addition to calculating a business’s fair market value, business appraisers assess the strengths and weaknesses of a business. With these insights, you can create an effective strategy to maximize the value of a business . Read How to Increase the Value of Your Business to learn more. 

Attracting Investors and Securing Financing

For many businesses, attracting investors and securing financing for a small business is essential. Obtaining a business valuation provides investors and lenders with a clear understanding of your company’s potential. This shows the feasibility of your business to stakeholders and demonstrates transparency and financial diligence. As such, receiving a business valuation for a business plan makes it more compelling to potential financiers. If you are seeking financing for a small business, consider securing an SBA loan . To learn more, see SBA Loans or SBA Financing .

As a professional business appraiser, Peak Business Valuation works with over 90 SBA lenders across the country. We are happy to connect you with an experienced SBA lender that meets your needs! Additionally, Peak can provide you with a business valuation and discuss any questions you may have on business valuations and creating a business plan. Get started today by scheduling a free consultation with Peak Business Valuation below! 

Minimizing Risks 

Furthermore, using a business valuation for a business plan helps identify and mitigate risks. The valuation process analyzes the strengths, weaknesses, risks, and opportunities associated with a business. This information helps business owners develop strategies to overcome challenges. In addition, understanding the weaknesses of a business allows operators to make adjustments to increase the business’s value. To learn more about navigating risks, see Risks When Buying a Business . 

Allocating Resources

As mentioned before, the valuation report provides valuable insights into a business’s strengths and weaknesses. This information allows you to allocate resources where they will have the most impact. For example, if the valuation report shows that your business lacks a strong online presence, you can allocate resources toward developing your website. As such, receiving a business valuation for a business plan can help you optimize resource allocation and improve a business’s efficiency.  

Strategic Decision-Making and Exit Planning

Finally, business valuations are crucial for strategic decision-making and exit planning . The valuation report provides a data-driven summary of your company’s fair market value and potential growth opportunities. This helps you understand how various strategies impact your business’s value. In addition, you can use these insights to develop a detailed exit plan whether you are selling the business , gifting it to family members , or making it public. As such, with a business valuation for a business plan, you can make informed choices that align with your business’s long-term objectives. If you have any questions, reach out to Peak today! See How Exit Planning Affects Your Business to learn more. 

If you are looking to start, buy , expand , or sell a business , it is vital to have a strong business plan. Business valuations are helpful whether you are creating a new business plan or strengthening your current one. As part of a business valuation, you will learn the value of a small business and discover the associated risks and opportunities. These insights can help you make informed decisions to maximize the value of a business . 

Peak Business Valuation , business appraiser, can help you with your business plan through a business valuation. We are happy to provide you with a business valuation for a small business and discuss any questions you may have about a business valuation for a business plan . Schedule a free consultation with Peak Business Valuation to get started!

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Rules of Thumb Business Valuation Methods Explained

Colin McCrea

7 min. read

Updated October 24, 2023

The rule of thumb has a long history in the business world especially when it comes to valuing business interests in the community. In order to avoid formal valuation report costs, shareholders utilize benchmarks of the industry and rules of thumb to estimate the ballpark values of their interests. This approach acts according to different scenarios where the rule of thumb may be more or less effective. 

This article will cover all about the rule of thumb business valuation approaches, when to use them, and their pros and cons.

Rules of thumb and business valuation 

Valuation techniques can materially undervalue or overvalue business interests. It enables shareholders to estimate the rough value of their business quickly and cost-effectively. However, in scenarios where you have to estimate a more precise and technical value like estate planning, litigation, and transactions—rules of thumb do not provide an accurate value.

What is a rule of thumb business valuation approach?

The rule of thumb is a business valuation method that is based on common sense and experience. It is a general principle that is regarded as approximately accurate but not meant to be scientifically correct. For estimating the value of a business, the process involves applying a multiple to an economic benefit of a specific industry. Metrics such as discretionary cash flow or business revenue are used. 

A company’s goodwill might be worth 2x more than the discretionary cash flow, or the accounting practice’s value might be worth 1 to 1.35x the annual revenue + work-in-progress (inventory). The rule of thumb traditionally originated from the combination of observations, real-world market transactions, hearsay, and experience. 

When to use the rules of thumb for a business valuation? 

This approach usually values a company depending on multiples from the specific industry such as cash flows, revenues, EBITDA, and others. Even though this is a valid method, you cannot use only this approach while valuing a business. The reason for this is that the rule of thumb only gives an estimated valuation that is specific to the industry. Different markets will have several different variations in multiples from the rule of thumb. 

Many other factors affect the valuation of a business . If two businesses are in the same industry, it is not necessary that you can compare them with each other as there can be differences in the business practices, customer base, cost structures, etc. A business valuation through the rule of thumb approach is generally developed over a long time. But, companies and industries keep evolving and growing and applying old value factors can give you an incorrect estimate. 

That said, business owners can still benefit from a rule of thumb as it can provide insights on a ballpark estimate for the value of a company. It can also suggest special purchasers, those who willingly pay a higher price for a company, by benefitting from the perceived synergies of purchasers. 

For many business owners, getting a formal valuation is worth the investment. Some reasons why include needing a more detailed picture of your company’s value, submitting taxes, outlining employee stock option plans, or presenting to investors or creditors.

• Rules of thumb in business valuation

The general rules of thumb are a good measure for certain industries, and where your company may stand compared to other industry peers . So seeing how the metrics in key industries stack up against each other may give you insight into whether your company is performing well or not. 

Many companies come from a variety of industries. While companies are all different, getting a valuation is the same process regardless of the industry. To explain further, let’s take a look at this list of the most profitable industries (according to a recent writeup from Yahoo Finance ).  

• Software (system and application)
• Computer peripherals
• Drugs and Pharmaceuticals
• Oil and Gas
• Household products
• Computer Services
• Healthcare Support Services
• Life Insurance
• Semiconductor Industry
• Information

In order to conduct the valuation for companies in these industries, there are several calculations that valuation analysts use. The following formulas are used to calculate the various aspects of the business valuation:

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Sales Multiples

Where Net Sales = Annual Gross Sales, net of returns and discounts allowed, if any.

The sales multiplier is the most used valuation metric, as it takes your total sales and compares them to other companies and their sales multiples. The majority of small and medium-sized companies used this metric for their valuation.

EBITA Multiple 

Where EBITDA = Operating Profit + Depreciation & Amortization

EBITDA means Earnings Before Interest, Taxes, Depreciation, and Amortization. This is commonly used for finding the value of medium to large businesses. Investors are able to compare your business to others in the same industry by taking away the expenses that skew a fair comparison.

SDE Multiple

Where SDE = Operating Profit + Depreciation + Amortization + Owner’s Compensation

SDE stands for seller’s discretionary earnings. This is the most common multiple to value small businesses. By using this, someone who is looking to acquire your business lets them know how much they would earn if they worked in the company. 

Gross Profit Multiple

Where Gross Profit = Net Sales – Cost of Goods Sold

Obtaining the gross profit can work best as a valuation method for companies that are losing money, but their gross profit serves as a good indicator for their total value.

Rule of thumb table

Given below is a table that describes the sales multiple, EBITDA multiple, SDE multiple, and profit multiple of various businesses. Have a look at it to understand more about the figures. 

Pros and cons of the rule of thumb valuation approach 

The rule of thumb valuation approach has several pros, but also cons. It’s important to know why this approach can be helpful but also why it won’t work for certain situations.

• The approach is straightforward, simple, and fast to apply
• You can save money and time to determine the value
• There are times that the rules of thumb are noted in buy-sell agreements to assist concerned parties in seeing the value they would receive in the transferral of equity
• The approach can have hidden assumptions concerning the risks and profitability of a company, which can lead to an incorrect valuation and a drop in price
• It does not reflect the essential items in the balance sheet (such as debt levels, real estate, non-operating assets, or cash on hand)
• Due to one-time shortfalls, the rule of thumb can drive wrong conclusions and estimations. 
• Examples of rule of thumb valuation

Let us take an example to understand the rule of thumb better. One rule in this approach is that insurance agencies tend to sell for 1 to 1.5x their net commission revenue. This generates an MVIC (market value of invested capital) basis. Here are two scenarios in which the rule of thumb can play out:

Base scenario

An insurance agency has a revenue of $2m. It has $600,000 in EBITDA. The valuation can be $2.4m MVIC. This falls within the spectrum of 1-1.5x of the net commission revenue rule of thumb.

Low-profit scenario

The agency revenue is steady at $2m, but the earnings before interest, tax, depreciation, and amortization drop to $360,000. The value is close to $1.4m. This value is less than the rule of thumb guidelines and settled in the spectrum of $2m to $3m. This means that you would have overpaid for the company.

Get professional advice for valuation 

Business shareholders have a unique tool to give a rough value of their business interests. This is an opportunity for them to estimate the ballpark value of the business fast and cost-efficiently. Shareholders can use the method in limited scenarios, be cautious, and not only rely on the rule of thumb valuation. 

Keep in mind that it is vital to know and understand the limitations and inner workings of the valuation method. It is best that before you use the rule of thumb valuation as your only estimation method, you should consult a professional for advice .

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Colin is the CVA of Eqvista , leading in the valuation section of private companies, and specializing in the space around company valuation, investments, VC funding, seed funding, cap table, equity management.

Table of Contents

• Rules of thumb and business valuation 
• Pros and cons of the rule of thumb valuation approach 
• Get professional advice for valuation 

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Business Valuation is a comprehensive process used to determine the economic value of a whole business or company unit, based on factors like its asset value, market position, and future earnings potential.

A business valuation involves assessing various elements of the business to estimate its selling price or value for different purposes, such as investment analysis, business sales, or mergers and acquisitions. For entrepreneurs and business owners, understanding business valuation is key to making informed decisions about their company’s future and financial health.

Valuation Methods

Asset-based approach (also known as book valuation).

The Asset-Based Approach, often referred to as “Book Valuation,” focuses on the value of a company’s assets. It involves totaling the value of all the company’s tangible and intangible assets and then subtracting its liabilities. This approach is most applicable to companies with significant physical assets.

Income Approach (Also Known as Discounted Cash Flow (DCF) Analysis)

The Income Approach, frequently termed as “Discounted Cash Flow (DCF) Analysis,” estimates a company’s value based on its expected future cash flows. These cash flows are then discounted back to their present value, using a discount rate that reflects the risk of the cash flows. This method is particularly useful for companies with stable and predictable cash flows.

Market Approach

The Market Approach values a company by comparing it to similar companies that have been sold or are publicly traded. This approach is especially relevant for businesses operating in industries with a large number of comparable companies and transactions.

Hybrid Approach

A Hybrid Approach combines elements of the asset-based, income, and market approaches to provide a more comprehensive valuation. This method is particularly useful when each individual approach has limitations due to the unique characteristics of the business being valued. For instance, a business might have significant physical assets (favoring an asset-based approach), stable cash flows (suitable for the income approach), and comparable companies in the market (aligning with the market approach). By integrating these methods, the hybrid approach offers a balanced and nuanced valuation, considering multiple facets of the business’s value.

Application in Business Valuation

In practice, the choice of valuation method depends on the nature of the business, the purpose of the valuation, and the availability of data. For instance, startups with limited financial history might not find the income approach as effective, whereas established companies with significant physical assets might lean towards the asset-based approach. The hybrid approach can be particularly useful in complex valuation scenarios where a single method may not capture the full picture of a company’s value.

Using a combination of these methods can provide a more rounded and accurate estimation of a company’s worth, essential for strategic decision-making, investment analysis, and transactions such as mergers and acquisitions.

Valuation Professionals:

Certified Valuation Analysts (CVAs), Accredited Senior Appraisers (ASAs), and other valuation professionals play a crucial role in the business valuation process. They provide expertise, objectivity, and standardized methods to ensure a fair and accurate valuation, especially in complex scenarios or legal proceedings.

Frequently Asked Questions

• When should a business consider getting a valuation?

A business should consider getting a valuation in several scenarios, such as when contemplating a sale or merger, seeking investment, planning for taxes, or during legal proceedings involving asset division. It’s also useful for strategic planning and understanding the financial growth or trajectory of the company.

• How can the choice of valuation method impact the estimated value of a business?

The choice of valuation method can significantly impact the estimated value of a business as each method focuses on different aspects of value. For instance, the asset-based approach might yield a different value compared to the income or market approach, as it focuses on tangible assets rather than earnings potential or market comparables. The appropriate method depends on the nature of the business and the purpose of the valuation.

• Why is it important to engage professional valuation services?

Engaging professional valuation services is important to ensure accuracy, objectivity, and compliance with legal and financial standards. Professional valuators have the expertise to apply the most suitable valuation methods and consider all relevant factors, resulting in a more reliable and credible valuation. This is especially crucial in high-stakes situations like legal disputes, significant business transactions, or complex financial planning.

• What is a valuation multiple and how is it used in business valuation?

A valuation multiple is a financial metric used to estimate a business’s market value relative to a key financial statistic, such as earnings, sales, or assets. Common examples include price-to-earnings (P/E) ratio, enterprise value-to-sales (EV/Sales), and enterprise value-to-EBITDA (EV/EBITDA). These multiples are derived from market comparisons and are used to value a business by applying the multiple to the corresponding financial metric of the business being valued. They are particularly useful in the market approach to business valuation.

• Can a brand-new company be valued, and what factors contribute to its valuation?

In most cases, a brand-new company without operational history or financials may not have a significant established value. However, its potential value can be determined based on factors such as the entrepreneur’s experience, the uniqueness of the business idea, market potential, intellectual property, and anticipated future cash flows. While it’s challenging to assign a concrete value to a new company, these factors can provide investors or founders with an initial estimation of its potential worth.

• How is the valuation of a brand-new company typically determined?

The valuation of a brand-new company is often determined by projecting its future cash flows and then discounting them to their present value using an appropriate discount rate (as in the Discounted Cash Flow Analysis). This method is predicated on the expectation that the company will generate positive cash flows in the future. Other factors, like market demand for the product or service, the strength of the business plan , and the experience of the management team, also play a crucial role in this valuation process. For very early-stage companies, valuation may also be influenced by comparable transactions in the industry or by the amount of capital the founders need and the amount of equity they are willing to give up.

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The Importance of Business Valuation

Business owners spend considerable time and energy trying to enhance company value by developing growth plans with well-defined goals.  These plans are designed to maximize value over time, but it’s hard to achieve those goals without knowing where to begin.

Not only do owners need to understand what their business is worth today, they also need to know what supports and drives that value.   Far too often, owner overconfidence or apathy causes this step to either be neglected or downplayed, or at a minimum, based on incomplete data or conjecture.  In this case, a valuation usually serves as a reality check for owners with a biased or uninformed viewpoint on what their business is worth.

Why would a business owner want a valuation? 

The traditional answer is that valuations are needed to resolve tax or legal issues.  However, valuations are actually performed for a myriad of reasons, including but certainly not limited to selling or acquiring a business.  In the cases of death, disability, disaster or divorce, valuations are needed to equitably determine the business assets according to terms spelled out in legal filings.

Valuations are often needed when gifting or donating company stock as part of a charitable contribution, in resolving IRS or shareholder disputes, or when converting a C-corporation to an S-corporation.  There could be requirements in a buy/sell, partnership or shareholder agreement that necessitates a business valuation.

In addition, owners would generally perform a valuation when attempting to raise strategic capital or obtaining a Small Business Association (SBA) loan.  Implementing an Employee Stock Ownership Plan (ESOP) would certainly necessitate an initial and annual valuation.

Moreover, a formal business valuation can help to reconcile perceived opinions on value, and coupled with a marketability analysis, it can help a business owner determine relative value in the marketplace.

How does the business valuation process work? 

The assessment of value is indeed an art form as much as it is a science.  Business valuation is a process and a set of procedures used to estimate the economic value of an owner’s interest in a business.  An accurate valuation of a closely held business is an essential tool for a business owner to assess both opportunities and opportunity costs as they plan for future growth and eventual transition.  It provides either a point-in-time assessment of relative value for an owner, or perhaps the price a buyer would be willing to acquire the business.

On its face, business valuation is actually a relatively simple and straightforward concept.  A qualified professional first analyzes the subject company’s financial statements and considers comparable transactions, industry ratios and other quantitative and qualitative information.  Then, applicable adjustments are made to align the subject company to an industry standard or benchmark.  The result is a reasonable assessment of fair value, usually performed under the  Uniform Standards of Professional Appraisal Practice (USPAP).

Despite the benefits, however, many business owners are apprehensive about what to expect when going through the valuation process.  In some cases, valuations can expose areas of the business which actually take away from value, such as weak financial and accounting controls, under-performing assets and weaker operating ratios relative to its peer group.   The entire valuation process can provide an overview of strengths and weaknesses of the reviewed company.

What are the key considerations for the business valuation?

The business valuation professional will first consider the purpose and objective of the valuation.  They will then look at the nature and background of the business, its products and services, as well as the industry life cycle, economic and political environment.  Unique factors are then considered, including customer relationships, executive compensation, as well as excess assets, working capital, and liabilities.

Considerations which could have a profound influence on value include goodwill or other intangible assets, the dependency on an owner or key employee(s), diversity of the customer base, market position and the competitive landscape of the industry.

There are three widely accepted fundamental methods used in valuing closely held business interests, the asset, income, and market approach.  The methods most useful in determining final value will depend on several factors, including the purpose of the valuation and the type of company being valued.

What are the Exit & Estate planning considerations for retirement?

A business valuation is an essential component of the estate and tax planning process for owners and their families.  Since the value of the business often accounts for the bulk of the owner’s net worth, determining a reasonable value is not only critical to retirement planning following the exit from the business, but also the groundwork required to both protect and transfer that wealth to the next generation.

Statistics suggest that most owners don’t do business planning or even plan for their own exit, and as a result, many transactions leave sellers feeling somewhat unfulfilled.  If used correctly, however, a thorough valuation can provide that very important starting point in strategic growth planning, as well as some important visibility for an owner contemplating the long term.  It can also serve as a meaningful tool as part of a business “gap analysis” to help identify and eliminate the various anchors to value growth during the exit planning process.  A valuation incorporated into a comprehensive business assessment should yield higher business growth over time, as well as higher terminal values and selling prices.

Jeffrey Elder, MBA – IBBA Certified M&A advisor, Texas Certified Business Broker, International Business Exchange, Austin Texas

Eric C. Boyce, CFA – Chief Executive Officer, BKA Business Consulting, LLC, Cedar Park, Texas (home of the  BizVue tm  Five Pillars of Value Business Assessment platform)

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What makes a business valuable.

What classifies a business as valuable? The response varies depending on the size of the business and the industry. Certainly, most buyers want specific attributes like positive cash flow, efficient operations, a healthy market share and a strong management team.

• 8 elements that make a business more valuable:
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Why A Business Should Be Valuated?

When it comes to having their businesses valued, most business owners are impulsive. However, there are situations when being active pays off. Some valuations such as determining the worth of an estate’s business interest are inevitable. There are some arbitrary reasons for other valuations, yet they all assist business owners in strategizing tactics.

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Business Plan Evaluation

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What is Business Plan Evaluation?

A business plan evaluation is a critical process that involves the assessment of a business plan to determine its feasibility, viability, and potential for success. This process is crucial for entrepreneurs, investors, and other stakeholders as it helps them make informed decisions about the business. The evaluation process involves analyzing various aspects of the business plan, including the business model, market analysis, financial projections, and management team.

The purpose of a business plan evaluation is to identify strengths and weaknesses in the plan, assess the feasibility of the business idea, evaluate the potential for profitability, and determine the likelihood of achieving the business objectives. The evaluation process also helps identify areas where improvements can be made to enhance the chances of success. This process is particularly important for solopreneurs who are solely responsible for the success or failure of their business.

Importance of Business Plan Evaluation

The evaluation of a business plan is an essential step in the business planning process. It provides an opportunity for the entrepreneur to critically examine their business idea and identify potential challenges and opportunities . The evaluation process also provides valuable insights that can help improve the business plan and increase the chances of success.

For investors, a business plan evaluation is a crucial tool for risk assessment. It allows them to assess the viability of the business idea, the competence of the management team, and the potential for return on investment. This information is vital in making investment decisions.

For Solopreneurs

For solopreneurs, the evaluation of a business plan is particularly important. As they are solely responsible for the success or failure of their business, it is crucial that they thoroughly evaluate their business plan to ensure that it is feasible, viable, and has the potential to be profitable.

The evaluation process can help solopreneurs identify potential challenges and opportunities, assess the feasibility of their business idea, and determine the likelihood of achieving their business objectives. This information can be invaluable in helping them make informed decisions about their business.

For Investors

Investors use the evaluation process to determine whether or not to invest in a business. They look at various aspects of the business plan, including the business model, market analysis, financial projections, and management team, to assess the potential for success. If the evaluation reveals that the business plan is solid and has a high potential for success, the investor may decide to invest in the business.

Components of a Business Plan Evaluation

A business plan evaluation involves the analysis of various components of the business plan. These components include the executive summary, business description, market analysis, organization and management, product line or service, marketing and sales, and financial projections.

Each of these components plays a crucial role in the overall success of the business, and therefore, they must be thoroughly evaluated to ensure that they are realistic, achievable, and aligned with the business objectives.

Executive Summary

The executive summary is the first section of a business plan and provides a brief overview of the business. It includes information about the business concept, the business model, the target market, the competitive advantage, and the financial projections. The executive summary is often the first thing that investors read, and therefore, it must be compelling and persuasive.

In the evaluation process, the executive summary is assessed to determine whether it clearly and concisely presents the business idea and the plan for achieving the business objectives. The evaluator also assesses whether the executive summary is compelling and persuasive enough to attract the attention of investors.

Business Description

The business description provides detailed information about the business. It includes information about the nature of the business, the industry, the business model, the products or services, and the target market. The business description also provides information about the business's competitive advantage and how it plans to achieve its objectives.

In the evaluation process, the business description is assessed to determine whether it provides a clear and comprehensive description of the business. The evaluator also assesses whether the business description clearly outlines the business's competitive advantage and how it plans to achieve its objectives.

Methods of Business Plan Evaluation

There are several methods that can be used to evaluate a business plan. These methods include the SWOT analysis, the feasibility analysis, the competitive analysis, and the financial analysis. Each of these methods provides a different perspective on the business plan and can provide valuable insights into the potential for success.

It's important to note that no single method can provide a complete evaluation of a business plan. Therefore, it's recommended to use a combination of these methods to get a comprehensive understanding of the business plan.

SWOT Analysis

SWOT analysis is a strategic planning tool that is used to identify the strengths, weaknesses, opportunities, and threats related to a business. This method involves examining the internal and external factors that can affect the success of the business.

In the evaluation process, a SWOT analysis can provide valuable insights into the potential for success of the business. It can help identify the strengths and weaknesses of the business plan, as well as the opportunities and threats in the market.

Feasibility Analysis

A feasibility analysis is a process that is used to determine whether a business idea is viable. This method involves assessing the practicality of the business idea and whether it can be successfully implemented.

In the evaluation process, a feasibility analysis can provide valuable insights into the feasibility of the business plan. It can help determine whether the business idea is practical and whether it can be successfully implemented.

In conclusion, a business plan evaluation is a critical process that involves the assessment of a business plan to determine its feasibility, viability, and potential for success. This process is crucial for entrepreneurs, investors, and other stakeholders as it helps them make informed decisions about the business.

The evaluation process involves analyzing various aspects of the business plan, including the business model, market analysis, financial projections, and management team. The purpose of a business plan evaluation is to identify strengths and weaknesses in the plan, assess the feasibility of the business idea, evaluate the potential for profitability, and determine the likelihood of achieving the business objectives.

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Risepreneur podcast aims to equip business owners with practical strategies, industry insights, and expert advice that they can directly apply to scale their businesses effectively and plan strategic exits that maximize their valuation. Ultimately, the goal is to be a go-to resource that inspires and guides entrepreneurs toward achieving significant business growth and successful exits, ensuring they're well-prepared for their journey ahead.

The Risepreneur Podcast Boruch Akbosh

• 5.0 • 3 Ratings
• APR 18, 2024

John Hewitt on Building a Billion-Dollar Business Part 1 | Risepreneur Podcast | Ep. 7

How does John Hewitt, a seasoned entrepreneur with over five decades of experience, harness entrepreneurial success? In this episode, Boruch sits down with John Hewitt, a veteran entrepreneur boasting over 50 years of experience in the realm of franchising. As the mastermind behind ventures like Jackson Hewitt and Liberty Tax, both achieving substantial valuations, Hewitt offers a wealth of insights into navigating the entrepreneurial landscape. Delving into Hewitt's journey, the conversation unveils his early entrepreneurial spark and penchant for challenging norms. From there, it explores the pivotal role of integrity in business, the strategic prowess behind franchising, and the significance of fostering a company culture rooted in shared values. Tune in as Hewitt shares his wisdom on leadership, fostering diverse perspectives, and the essential interplay between creativity and attention to detail in building successful teams. Plus, discover Hewitt's unique approach to parenting and career development, and his dedication to influencing the next generation of entrepreneurs. Stay until the end to learn how Hewitt's latest endeavor, Loyalty Brands, continues his legacy of empowering aspiring entrepreneurs, and how you, dear listener, can grab a free copy of his book, 'I Compete,' as a testament to his commitment to knowledge sharing. Join us as we unravel the secrets to entrepreneurial success with the incomparable John Hewitt. Key Takeaways: Integrity Matters: Always do business with honesty and integrity—it's the foundation of success. Question Everything: Don't be afraid to challenge the way things are done. Innovation comes from asking "why" and finding new solutions. Franchising Can Boost Growth: Franchising can be a powerful way to expand your business quickly while keeping quality high. Culture Counts: Create a positive company culture that reflects your values. Happy employees lead to happy customers. Share Knowledge: Helping others succeed is rewarding. Share what you've learned and mentor aspiring entrepreneurs. Embrace Differences: Different perspectives lead to better decisions. Happy Customers = Success: Keeping customers satisfied is key. Focus on delivering great experiences to keep them coming back. Stay Optimistic: Look to the future with positivity and excitement. There's always more to learn and achieve. _______________ Check out our other channels:Instagram: RisepreneurYouTube: https://www.youtube.com/@risepreneurLinkedIn: https://www.linkedin.com/company/risepreneurWebsite: https://www.risepreneur.com_______________Follow John Hewitt on Social Media! ↓🌐 Company Website: https://www.loyaltybrands.com/🗸 Twitter:  https://twitter.com/@Loyalty_Brands👔 LinkedIn: https://www.linkedin.com/in/john-t-hewitt-9917b7149/👍Facebook: https://www.facebook.com/loyaltybrandsfranchises/📲 Instagram: https://www.instagram.com/loyalty_brands/_______________Follow us on Social Media! ↓📲 Instagram: https://www.instagram.com/risepreneur👍 Facebook: https://www.facebook.com/risepreneur📊 LinkedIn: https://www.linkedin.com/company/risepreneur🎵 TikTok: https://www.tiktok.com/@risepreneurConnect with Boruch Akbosh:🌐 Website: https://www.akbosh.com📲 Instagram: https://www.instagram.com/boruchakbosh👍 Facebook: https://www.facebook.com/BoruchAkboshOfficial👔 LinkedIn: https://www.linkedin.com/in/boruchakbosh🎵 TikTok: https://www.tiktok.com/@boruchakboshofficial🎬 YouTube: https://www.youtube.com/@BoruchAkbosh _______________ #entrepreneurship #businessGrowth #systemOverProduct #leadership #businessExpansion #followTheSystem #exitStrategy #investmentStrategies #founderJourney #visionaryLeadership #creatingBillionDollarCompanies #franchiseVsCorporate #PeterDruckerWisdom #effectiveExecutive #corporateCultureAsset #JohnHewittStory #LoyaltyBrandsFounder #ICOMPETEbook #successfulEntrepreneurs --- Send in a voice message: ht

• APR 15, 2024

Growth and Exits: Guiding Insights with Patrick Löffler | Risepreneur Podcast | Ep. 6

How vital is execution over ideas in business? In this episode of Risepreneur, Patrick Löffler, co-founder of Givve, shares insights into his entrepreneurial journey. He discusses Givve's transition from a B2C to a B2B model, the challenges of work-life balance, and the significance of maintaining core values. Patrick also delves into the strategic pivot that propelled Givve's success, the role of external consultants in exit processes, and the importance of choosing the right strategic buyer. Emphasizing execution over ideas, Patrick highlights how aligning personal values with the workplace can foster fulfillment and growth. Key Takeaways: Strategic Advisors: Selecting the right external advisors is crucial for successful business exits. B2B Shift: Givve's transition to a B2B model was a game-changer, highlighting the importance of strategic business shifts. Core Values: Sticking to core values guided Givve's success, shaping decision-making and fostering a value-driven culture. Execution Matters: Prioritizing execution over ideas is key, emphasizing disciplined action and perseverance. Navigating Challenges: Patrick shares insights on overcoming financial hurdles and navigating investor dynamics. Exit Strategy: The exit process requires careful preparation and execution for a successful company sale. Future Growth: Reflecting on Givve's journey, Patrick emphasizes the fulfillment of building a value-driven workplace and embracing strategic opportunities. _______________ Check out our other channels: Instagram: Risepreneur YouTube: https://www.youtube.com/@risepreneur LinkedIn: https://www.linkedin.com/company/risepreneur Website: https://www.risepreneur.com _______________ Follow Patrick Löffler on Social Media! ↓ 📧 mail: [email protected] 👨‍💻 Personal website: patrickloeffler.de 🌐 Company Website: givve.com 🌐 Company Website: candela-project.com 👔 LinkedIn: https://www.linkedin.com/in/mikemoyer/ _______________ Follow us on Social Media! ↓ 📲 Instagram: https://www.instagram.com/risepreneur 👍 Facebook: https://www.facebook.com/risepreneur 📊 LinkedIn: https://www.linkedin.com/company/risepreneur 🎵 TikTok: https://www.tiktok.com/@risepreneur Connect with Boruch Akbosh: 🌐 Website: https://www.akbosh.com 📲 Instagram: https://www.instagram.com/boruchakbosh 👍 Facebook: https://www.facebook.com/BoruchAkboshOfficial 👔 LinkedIn: https://www.linkedin.com/in/boruchakbosh 🎵 TikTok: https://www.tiktok.com/@boruchakboshofficial 🎬 YouTube: https://www.youtube.com/@BoruchAkbosh _______________ #EntrepreneurshipJourney #BusinessScaling #StartupChallenges #SuccessfulExit #GrowthMindset #EntrepreneurialSpirit #RiskAndRewards #InnovationAndStrategy #LeadershipInsights #FamilyAndBusinessBalance #DigitalBusinessSuccess #ValueDrivenBusiness #StartupToExit #FinancialForecasting #TeamBuildingStrategies #RemoteWorkCulture #StrategicPlanning #ExitStrategy #BusinessTransformation #InvestorRelations #Risepreneur #PatrickLoeffler --- Send in a voice message: https://podcasters.spotify.com/pod/show/the-risepreneur-podcast/message

• 1 hr 21 min
• APR 8, 2024

From Rabbits to Riches: Learning Fair Equity with Mike Moyer | Risepreneur Podcast | Ep. 5

Ever wondered how to ensure fair equity splits in business? Join us as we explore the groundbreaking 'Slicing Pie' model with serial entrepreneur Mike Moyer. Learn how this innovative approach revolutionizes equity distribution and fosters fairness in business from the ground up! In this episode of Risepreneur, Mike Moyer, a serial entrepreneur, author, and professor, shares his entrepreneurial journey starting from his childhood passion for entrepreneurship to his professional career oscillating between startups and 'real jobs.' Moyer recounts his experiences and lessons learned from various ventures, including a memorable startup exit and the challenges he faced in corporate roles. The discussion delves into 'Slicing Pie,' a model Moyer developed for creating fair equity splits in startups. He explains how traditional equity splitting methods can lead to unfair outcomes and how the Slicing Pie model ensures everyone involved in a startup is rewarded equitably based on their contributions. Moyer's insights on performance management, the importance of fairness in business, and how Slicing Pie can be applied in different stages of a company provide a comprehensive understanding of equitable business practices. _______________ Check out our other channels: Instagram: https://www.instagram.com/risepreneur YouTube: https://www.youtube.com/@risepreneur LinkedIn: https://www.linkedin.com/company/risepreneur Website: https://www.risepreneur.com _______________ Follow Mike Moyer on Social Media! ↓ 📧 mail: [email protected] 👨‍💻 Personal website: https://mikemoyer.com/ 👔 LinkedIn: https://www.linkedin.com/in/mikemoyer/ 🗸 Twitter: https://twitter.com/mikemoyer 👍Facebook: https://twitter.com/mikemoyer _______________ Follow us on Social Media! ↓ 📲 Instagram: https://www.instagram.com/risepreneur 👍 Facebook: https://www.facebook.com/risepreneur 📊 LinkedIn: https://www.linkedin.com/company/risepreneur 🎵 TikTok: https://www.tiktok.com/@risepreneur Connect with Boruch Akbosh: 🌐 Website: https://www.akbosh.com 📲 Instagram: https://www.instagram.com/boruchakbosh 👍 Facebook: https://www.facebook.com/BoruchAkboshOfficial 👔 LinkedIn: https://www.linkedin.com/in/boruchakbosh 🎵 TikTok: https://www.tiktok.com/@boruchakboshofficial 🎬 YouTube: https://www.youtube.com/@BoruchAkbosh _______________ --- Send in a voice message: https://podcasters.spotify.com/pod/show/the-risepreneur-podcast/message

Startup Realities with Shaun Gold for Successful Entrepreneurship | Risepreneur Podcast | Ep. 4

Ready to uncover the secrets to entrepreneurial success and resilience required in the dynamic world of startups? Join us as we dive deep into the transformative journey of Shaun Gold, a bestselling author, speaker, and trusted mentor to startups. From navigating the vibrant nightlife scene in Miami to venturing into the realms of venture capital and beyond, Shaun shares invaluable insights and advice for aspiring founders. Furthermore, he emphasizes the importance of pushing forward despite failures, rejections, and criticism, highlighting how confidence grows with experience. Additionally, Shaun suggests that making mistakes and facing setbacks can build the resilience and confidence needed to succeed in business. He also highlights the need to adapt and evolve with changing market demands and technologies and that understanding what truly offers value to your customers is critical. Get ready for an enlightening conversation filled with candid wisdom and practical strategies for entrepreneurial triumph! Key Takeaways: 1. Embrace confidence and directness in your business dealings to stand out in the crowd. 2. Adaptability is key - evolve with your customers and the market to stay ahead of the game. 3. Learn from failures and be willing to pivot your strategies when necessary. 4. Focus on creating a core product or service that meets a real need in the market. 5. Cultivate resilience to overcome setbacks and challenges on your entrepreneurial journey. ________________________________________ Check out our other channels: Instagram: https://www.instagram.com/risepreneur YouTube: https://www.youtube.com/@risepreneur LinkedIn: https://www.linkedin.com/company/risepreneur Website: https://www.risepreneur.com ________________________________________ Check out Shaun Gold ↓ 📧 mail: [email protected] 🌐 Company Website: http://www.shaungold.com// 👔 LinkedIn: https://www.linkedin.com/in/shaungold/ 📲 Instagram: https://www.instagram.com/iamshaungold/ 🗸 Twitter: https://twitter.com/IamShaunGold 👍Facebook: https://www.facebook.com/shaun.gold.1/ ________________________________________ Follow us on Social Media! ↓ 📲 Instagram: https://www.instagram.com/risepreneur 👍 Facebook: https://www.facebook.com/risepreneur 📊 LinkedIn: https://www.linkedin.com/company/risepreneur 🎵 TikTok: https://www.tiktok.com/@risepreneur Connect with Boruch Akbosh: 🌐 Website: https://www.akbosh.com 📲 Instagram: https://www.instagram.com/boruchakbosh 👍 Facebook: https://www.facebook.com/BoruchAkboshOfficial 👔 LinkedIn: https://www.linkedin.com/in/boruchakbosh 🎵 TikTok: https://www.tiktok.com/@boruchakboshofficial 🎬 YouTube: https://www.youtube.com/@BoruchAkbosh ______________________________________________________________________ #RisepreneurPodcast #Entrepreneurship #Startups #BusinessGrowth #ExitStrategy #ScalingBusinesses #SuccessMindset #SeanGold #BusinessConsulting #NightlifeEntrepreneur #InvestorInsights #VentureCapital #Innovation #Leadership #SaaS #TechTrends #EntrepreneurialJourney #StartUpAdvice #BusinessModelInnovation #FailureToSuccess #BusinessResilience #CreativeEntrepreneurship #NetworkingForSuccess #CareerPivot #RealWorldBusiness #StartupChallenges #BuildingSuccess #OvercomingSetbacks #EntrepreneurialMindset --- Send in a voice message: https://podcasters.spotify.com/pod/show/the-risepreneur-podcast/message

• MAR 27, 2024

The Intersection of Faith, Failure, and Scaling Businesses | Risepreneur Podcast | Ep. 3

Ready to discover the transformative power of servant leadership in business? In this engaging episode of the Risepreneur podcast, guest Kurt Uhlir, an experienced entrepreneur, and inventor, shares his transformative journey towards servant leadership and its impact on scaling businesses sustainably. Beginning with his early entrepreneurial ventures, Kurt discusses the pivotal moments that reshaped his approach to leadership, emphasizing authentic relationships, transparency, and empowerment of employees. The discussion explores how transitioning to a servant leadership model not only supports business and personal growth but also encourages a balanced life, community contribution, and a positive workplace culture. Through Kurt's personal and professional experiences, the episode offers valuable insights into achieving long-term happiness, strategic delegation, and the importance of purpose-driven leadership for entrepreneurs aiming to leave a lasting legacy. Key Takeaways: 1. The significance of accountability and transparency in leadership 2. Embracing humility and learning in business 3. Cultivating a culture of support and growth 4. Navigating team dynamics and fostering effective delegation 5. Harnessing technology for team management and transparency 00:00 Unlocking the Entrepreneurial Mindset: A Journey from Childhood to Success 02:22 The Power of Early Experiences: Shaping a Future Entrepreneur 07:04 Embracing Failure and Success: The Entrepreneurial Path 13:56 Redefining Success: Lessons from the Corporate World 27:49 Cultivating a Culture of Humility and Learning in Business 37:53 Scaling Your Business with Empathy and Effective Delegation 38:23 Unlocking Accountability and Transparency in Teams 39:03 The Power of Transparency in the Workplace 39:11 Leveraging Technology for Team Management 40:34 Navigating Team Dynamics and Self-Selection 42:04 Cultivating a Culture of Support and Growth 42:35 Embracing Servant Leadership for Business Success 43:56 Personal Growth and Professional Development 52:47 Strategic Marketing and the Importance of Transparency 01:05:50 Reflecting on Leadership and Personal Transformation 01:11:59 Exploring Purpose-Driven Leadership and Spirituality 01:15:25 Conclusion: The Journey of Growth and Impact ________________________________________ Check out our other channels: Instagram:   / risepreneur   YouTube:    / @risepreneur   LinkedIn:   / risepreneur   Website: https://www.risepreneur.com ________________________________________ 📧 mail: [email protected] 🌐 Company Website: https://www.etherealinnovations.com/ 👨‍💻 Personal website:https://kurtuhlir.com/ 👔 LinkedIn:   / kurtuhlir   📲 Instagram:   / kurtuhlir   🗸 Twitter:   / kurtuhlir   👍Facebook:   / kurt.uhlir   ________________________________________ Follow us on Social Media! ↓ 📲 Instagram:   / risepreneur   👍 Facebook:   / risepreneur   📊 LinkedIn:   / risepreneur   🎵 TikTok:   / risepreneur   Connect with Boruch Akbosh: 🌐 Website: https://www.akbosh.com 📲 Instagram:   / boruchakbosh   👍 Facebook:   / boruchakboshofficial   👔 LinkedIn:   / boruchakbosh   🎵 TikTok:   / boruchakboshofficial   🎬 YouTube:    / @boruchakbosh   ________________________________________ #ServantLeadership #LeadershipJourney #BusinessTransformation #Entrepreneurship #Business #BusinessSuccess #BusinessSuccessTips #BusinessGrowth #LeadershipDevelopment #WorkplaceCulture #Empowerment #AuthenticLeadership #LegacyBuilding #BusinessCoaching #BusinessMentor #BusinessMentorship #WorkLifeBalance #PodcastEpisode #SuccessMindset #PersonalGrowth #ProfessionalDevelopment #BusinessSuccession #Risepreneur #RisepreneurPodcast --- Send in a voice message: https://podcasters.spotify.com/pod/show/the-risepreneur-podcast/message

• 1 hr 16 min
• MAR 18, 2024

Maximize Business Value: Zach Oehlman's Growth and Scaling Strategies | Learn and Grow Rich | Risepreneur Podcast | Ep. 2

"Ready to uncover the key secrets to assessing business health, mitigating risks, and driving explosive growth with effective leadership and sales strategies? Join our guest, Zach Oehlman, founder of Learn and Grow Rich, as he shares his journey from farm management to successful private equity and real estate investing. Zach's expertise extends beyond mere business growth. He offers insights on optimizing business operations, understanding financial intricacies, and acquiring businesses for maximum returns. Learn how Zach's real estate investments intertwine with business ventures, creating a symbiotic relationship between businesses and real estate for wealth generation. Gain valuable insights into his unique approach to enhancing company value, focusing on clear financials, risk assessment, and strategic acquisitions. Key Takeaways: 1. Zach Oehlman's inspiring journey from farm management to private equity and real estate investing. 2. Strategies for optimizing business operations and understanding the financial nuances of scaling. 3. Leveraging the synergy between businesses and real estate for wealth generation and tax benefits. 4. Unveiling a unique approach to enhancing company value and nurturing profitable ventures. 5. The importance of aligning team goals with business objectives and fostering a culture of growth and success. 00:00 Introduction00:29 Welcome to the Risepreneur Podcast00:44 Guest Introduction: Zach Oehlman01:19 Zach's Journey: From Farming to Finance02:15 The Struggles and Triumphs of Starting a Career03:44 Transitioning into Real Estate and Business Investment04:38 The Difference Between Business and Real Estate Investment08:10 The Importance of Community in Business Growth08:30 The Concept of Learn and Grow Rich11:50 Transitioning into Business Valuation and Scaling16:37 The Importance of Financials in Business Valuation26:29 Understanding Business Risk and Mitigation27:29 The Importance of Diversifying Your Client Base28:05 Assessing the Health of a Company28:36 Minimizing Risk through Contractual Agreements29:20 The FOSM Approach: Finance, Operation, Sales, and Marketing31:06 The Pitfalls of Prioritizing Marketing Over Operations31:49 The Importance of Delivering on Promises31:56 The Value of Investing in Product Quality32:44 The Challenges and Risks of Startups33:57 The Power of Financial Projections and Analysis38:00 The Importance of Operational Efficiency and Tracking40:24 The Impact of Company Culture and Leadership on Business Success44:33 The Role of Employees in Achieving Business Goals48:15 Final Thoughts ____________________________________________________________ Check out Zach Oehlman: 🌐 Website: https://learnandgrowrich.net/ 📲 Instagram: https://www.instagram.com/learnandgrowrichnow/ 👍 Facebook: https://www.facebook.com/zach.oehlman 👔 LinkedIn: https://www.linkedin.com/in/zachoehlman/ ____________________________________________________________ Follow us on Social Media! ↓ 📲 Instagram: https://www.instagram.com/risepreneur/ 👍 Facebook: https://www.facebook.com/risepreneur 📊 LinkedIn: https://www.linkedin.com/company/risepreneur 🎵 TikTok: https://www.tiktok.com/@risepreneur Connect with Boruch Akbosh: 🌐 Website: https://www.akbosh.com 📲 Instagram: https://www.instagram.com/boruchakbosh/ 👍 Facebook: https://www.facebook.com/BoruchAkboshOfficial/ 👔 LinkedIn: https://www.linkedin.com/in/boruchakbosh/ 🎵 TikTok: https://www.tiktok.com/@boruchakboshofficial 🎬 YouTube: https://www.youtube.com/@BoruchAkbosh/ ____________________________________________________________ --- Send in a voice message: https://podcasters.spotify.com/pod/show/the-risepreneur-podcast/message

• © Boruch Akbosh

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CVC unveils plan to raise €1.25bn in long-delayed IPO

Private equity firm seeks valuation of up to €15bn after pressing ahead with float despite geopolitical turmoil.

CVC's offices in London. The company is aiming to raise more than €1.25 billion in an initial public offering on the Amsterdam stock exchange, ending a years-long wait to go public. Photograph: Jason Alden/Bloomberg

CVC Capital Partners, one of Europe’s largest private equity firms, is aiming to raise more than €1.25 billion in an initial public offering on the Amsterdam stock exchange, ending a years-long wait to go public.

The firm, which manages €186 billion in assets across a range of investment strategies, is seeking a valuation of between €13 billion and €15 billion, according to a person with knowledge of the plans. Some existing shareholders will sell stock and one backer, Blue Owl, will increase its stake.

The announcement, which confirms a Financial Times report last week, comes despite renewed turmoil in the Middle East. CVC has twice postponed plans to float when geopolitics unsettled markets.

The conflict in the Middle East had again prompted CVC to delay announcing its intention to float on Monday, but by a matter of hours, as opposed to months, CVC managing partner Rob Lucas said in an interview.

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“It’s a serious situation, we have been giving it a lot of consideration and thinking about it very carefully,” Lucas said. “We held the intention to float until after the markets opened so we could see they were stable.”

That the firm is pressing ahead indicates the increasing momentum across European markets for new listings. There have been a series of large IPOs in recent weeks, including by dermatology business Galderma and CVC-backed retailer Douglas.

CVC will also become the latest private equity group to go public, following US peers including Blackstone, KKR & Co and Apollo Global Management as well as European rivals EQT and Bridgepoint. Shares in some publicly traded peers including Blackstone and EQT have recently performed strongly, with both trading up more than 40 per cent over the past 12 months.

The auto-enrolment pension scheme seems good on paper, but how will it actually work?

Founded in the early 1990s by a group of dealmakers including Rolly Van Rappard, Steve Koltes and Donald Mackenzie, CVC has established itself as one of Europe’s biggest buyout groups.

Boosted by successful bets on companies ranging from Formula One to watchmaker Breitling, the group last year raised €26 billion for the largest private equity fund ever raised.

Alongside growing its core private equity unit, the group has expanded into other asset classes including credit and infrastructure. In 2021, CVC sold a stake in itself to US investment firm Blue Owl in a deal valuing the business at €15 billion.

The firm generated more than €1 billion in revenue last year, according to a statement confirming the company’s intention to float.

There has been internal debate about whether going public, which brings constant pressure to keep growing assets under management, will have an impact on the firm’s profit-focused culture.

CVC previously planned to list in 2022 but was forced to postpone after Russia launched its full-scale invasion of Ukraine. The firm revisited plans to go public last year but conflict in the Middle East contributed to it again pushing back a proposed listing.

The buyout industry has also faced challenges as higher interest rates have made dealmaking more difficult and some investments have come under pressure as borrowing costs increased.

While CVC has been preparing to list, some of its more experienced executives have retired from the business they founded. Koltes retired in 2022 and Mackenzie announced in February this year that he was stepping back. Van Rappard will chair CVC when it lists.

Going public will enable existing shareholders including the Hong Kong Monetary Authority, Kuwait Investment Authority, and Singapore’s GIC to reduce their stakes. Over time, older executives such as Mackenzie and Koltes who have stepped back can also more easily sell stock as a result.

It will also provide CVC with capital to pursue additional acquisitions in areas such as real estate and potentially help finance the acquisition of Dutch infrastructure investment firm DIF Capital Partners, which was announced last year.

Executives believe that the listing will also help increase the firm’s visibility and help it raise more money from a new group of backers including wealthy individuals over time. – Copyright The Financial Times Limited 2024

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