Page 9 - SEll Your Business Booklet

2

Valuation

Profitability and risk Barriers to entry Going concern or
Most businesses are valued based An accurate appraisal includes share value?
on a combination of assets and evaluating the barriers a com- Most businesses are valued as
the cash surpluses they generate. petitor may face if they started a going concern rather than on
The risk factor of the specific a similar business. For example, the value of company shares.
business is also considered: the businesses that require minimal Buyers are reluctant to buy
degree of threat from existing or capital investment or technical company shares for many reasons
potential competitors, technology knowledge have a low barrier to including the dangers of unknown
or consumer trends and other entry and therefore may have a possible future tax, credit or legal
factors that may affect earnings lower value. disadvantages, or liabilities based
or costs. on historical trading.

What about tax?
BC Test 22.01.17 Live VT BC Test 22.01.17 Live VT
22 January 2017 BC Test 22.01.17 Live VT
22 January 2017
Listing #
Listing # 22 January 2017
Examples of Comparable Sales Listing #
Appraisal Output
Comments and Further
Examples of Comparable Sales
Profitability and Risk Comments and Further Examples of Comparable Sales Professional advice is vital to
Considerations
Considerations
Earnings Based 11
Multiplier Period Normalised ($) Multiple Appraised ROI (%) Revenue ensure you fully understand your
Value ($) 11
Revenue for this business is trending upwards
EBPITDA (SDE) 3 year average 335,000 4.44 1,488,821 Matching Comparables
Profit
EBITDA 3 year average 265,000 5.96 1,579,342 17 Normalised EBPITDA for this business is trending Matching Comparables tax position when selling your
upwards
EBIT 3 year average 256,000 6.05 1,548,374 17 69
Add Backs account for less than 10% of
Average Earnings Based Value: $1,538,846 Normalised EBPITDA, which is positive 69 business. For instance, if you
Asset Based Acceptable EBPITDA Variance 20% From $268,000 to $402,000
Multiplier Period Normalised ($) Multiple Appraised ROI (%) Acceptable EBPITDA Variance 20% From $268,000 to $402,000
Value ($) 64 sell plant and equipment
EBPITDA (SDE) 3 year average 335,000 0.85 404,750 83 64
Trends Glossary of terms: Acceptable Multiple Variance 25% From 3.33 to 5.55 (or the company car) for more than
EBPITDA (SDE) EBPITDA / SDE is defined as net Acceptable Multiple Variance 25% From 3.33 to 5.55
income before deducting the primary owner's 531
compensation and benefits, other discretionary, the depreciated book value, you
non-operating, or non-recurring income or 531
expense, depreciation, interest, and taxes. If
there are additional owners working in the Database of Manufacturing
business, their compensation needs to be
adjusted to market rates. Database of Manufacturing may have to pay back some of the
EBITDA Earnings before interest, depreciation, Revenue ($) EBPITDA ($) Multiple (%) Price ($)
tax and amortisation after management costs.
2600000
3.91
EBIT Earnings before interest and tax. Revenue ($) EBPITDA ($) 383000 Multiple (%) Price ($) 1,500,000 tax you claimed when the items
2600000
383000
1,500,000
Normalisation The process of adjusting net 1034741 325000 3.86 3.91 1,255,000
profit to accurately reflect real expenses 2800000 400000 3.82 1,530,000
attributable to the operation of the business 1034741 325000 3.86 1,255,000
2800000
400000
1,530,000
Add-Backs Non-business expenses that are 2700000 380000 3.65 3.82 1,388,000 were depreciated (depreciation
added to net profit as part of normalisation 2501736 341000 3.64 3.65 1,243,000
1,388,000
380000
2700000
738558
1,243,000
2501736 318899 3.64 3.6 1,150,000
341000
Summary 808369 320000 3.59 3.6 1,150,000 clawback). Other tax liabilities may
318899
1,150,000
738558
1288341 311000 3.49 3.59 1,085,000
1,150,000
320000
808369
950,000
1612805 273602 3.47 3.49 1,085,000 be incurred on the profit of land
311000
1288341
1612805 273602 3.47 950,000
Important Notice and buildings if they’re included
The results of this appraisal are for the sole purpose of assisting a LINK broker in completing an appraisal of the market value of the business for the business owner. Both the input of data into
Important Notice
this form and interpretation of subsequent results require a trained LINK broker. This is not a registered valuation and does not purport to be such.
This tool and all data, algorithms, coefficients and formulas contained within it are the intellectual property and copyright of LINK Intellectual Property Limited
The results of this appraisal are for the sole purpose of assisting a LINK broker in completing an appraisal of the market value of the business for the business owner. Both the input of data into
this form and interpretation of subsequent results require a trained LINK broker. This is not a registered valuation and does not purport to be such. in the sale.
This tool and all data, algorithms, coefficients and formulas contained within it are the intellectual property and copyright of LINK Intellectual Property Limited
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