Valuation Spreadsheet
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SBDC Valuation Analysis Program This program uses various techniques to help small businesses look at various approaches to valuation for a potential purchase or sale of a small business. Each technique has a separate worksheet, and a final worksheet prepares a summary using all of the techniques. The Capitalized Adjusted Earnings approach and Discounted Future Earnings approach are standard valuation techniques employed in SBA lending, and utilize the methodology described in the SBA's Standard Operating Procedures (SOP) for lenders. The Business Valuation Model uses a fair market valuation of assets method, and is provided courtesy of John Nelson III, owner of the Capital Connection. The SBDC assists clients in putting their data into this format, and makes no guarantee or claim to the accuracy of the numbers. This information is typically "internal" in use by owners of a small business, and is not meant to be shared with others or used as the sole means of determining the value of a small business. The input process can begin by completing each sheet, left to right, and the user is warned to input over them at the peril of destroying formulas and making the program unusable as originally intended. by inputting data into BLUE fields only. The black fields are not protected,
Transcript of Valuation Spreadsheet
SBDC Valuation Analysis Program
This program uses various techniques to helpsmall businesses look at various approaches to valuationfor a potential purchase or sale of a small business.
Each technique has a separate worksheet, and a final worksheet preparesa summary using all of the techniques. The Capitalized Adjusted Earningsapproach and Discounted Future Earnings approach are standardvaluation techniques employed in SBA lending, and utilize the methodologydescribed in the SBA's Standard Operating Procedures (SOP) for lenders.The Business Valuation Model uses a fair market valuation of assets method, and is provided courtesy of John Nelson III, owner of the Capital Connection.
The SBDC assists clients in putting their data into this format, and makesno guarantee or claim to the accuracy of the numbers. This information is typically "internal" in use by owners of a small business, and is not meant tobe shared with others or used as the sole means of determining the value ofa small business.
The input process can begin by completing each sheet, left to right,
and the user is warned to input over them at the peril of destroying formulasand making the program unusable as originally intended.
by inputting data into BLUE fields only. The black fields are not protected,
"All financial and business information contained herein was provided by the management of the business. The SBDC assisted in compiling the data and presenting in the format shown, and makes no claims regarding the
accuracy of the presentation."
Company NameDate
Capitalized Adjusted Earnings (CAE)
Year Earnings Weight Adjusted Value Adjusted Value/Total Weight Indicated Value1 $50,000.00 1 $50,000.002 $35,000.00 2 $70,000.003 $65,000.00 3 $195,000.004 $60,000.00 4 $240,000.005 $80,000.00 5 $400,000.00
Total $290,000.00 15 $955,000.00 $63,666.67 $318,333.33
Take five years of historic earnings. Year 5 is the most recent earnings year.
"All financial and business information contained herein was provided by the management of the business. The SBDC assisted in compiling the data and presenting in the format shown, and makes no claims regarding the
accuracy of the presentation."
Company NameDate
Discounted Future Earnings (DFE)
Year Average earnings Growth rate Projected Growth Factor Net Present Value1 $58,000.00 105.00% $60,900.00 0.8333 $50,747.97 2 $60,900.00 105.00% $63,945.00 0.6944 $44,403.41 3 $63,945.00 105.00% $67,142.25 0.5787 $38,855.22 4 $67,142.25 105.00% $70,499.36 0.4822 $33,994.79 5 $70,499.36 105.00% $74,024.33 0.4018 $29,742.98 6 $74,024.33 105.00% $77,725.55 0.3349 $26,030.29 7 $77,725.55 105.00% $81,611.82 0.279 $22,769.70 8 $81,611.82 105.00% $85,692.42 0.2325 $19,923.49 9 $85,692.42 105.00% $89,977.04 0.1938 $17,437.55
10 $89,977.04 105.00% $94,475.89 0.1616 $15,267.30 Indicated Value $299,172.69
Average earnings year one, calculate the average earnings for the previous 5 yearsor justify number based on current operations
A moderate growth rate of 5% is used for the projection
Factors based on 20% risk typical for small business. Do not change the factor column.
"All financial and business information contained herein was provided by the management of the business. The SBDC assisted in compiling the data and presenting in the format shown, and makes no claims regarding the
accuracy of the presentation."
Company NameDate
PROVIDED BY JOHN W. NELSON III, CAPITAL CONNECTION
BUSINESS VALUATION ANALYSISBased on the most recent tax return. Sample This Case
1 Sales $ 700,000 $0
2 Operating Exp. (COGS) $ 414,400 $0 3 Admin. Exp. $ 148,400 $0 4 Owners Salary $ 49,000 $ 611,800 $0 5 Depreciation $ 21,000 $0 6 Stabilized Earnings $109,200.00 $ - 7 Asset Value & Working Cap.
A. Land $ 20,000 $0 B. Buildings $ 120,000 $0 Inventory $ - 1. Raw $ - $0 2. In Process $ - $0 3. Finished $ - $0 4. Resale $ - $0 C. Total Inventory $ 60,000 $0 D. Equipment $ 60,000 $0 F. Other Tangible Assets $ - $0 G. Total Tangible Assets $ 260,000 $0H. Working Capital Needed $ 40,000 $0 I. Tangible Assets & W/C $ 300,000 $0
8 Underlying Interest Rate $ 0.12 0%9 Cost Of Money
A. Tangible Assets & W/C $ 300,000 $0 B. Underlying Interest Rate $ 0.12 0%C. Total 9A + 9B $ 36,000 $0
10 Excess EarningsA. Stabilized Earnings $ 109,200 $0 B. Cost of Money $ 36,000 $0 C. Excess Earnings $ 73,200 $0
11 Calculate Multiple Rating (1 through 6 higher is better)A. Risk $ 4.0 0 B. Competitive $ 3.0 0 C. Industry $ 3.5 0 D. Company $ 5.0 0 E. Growth $ 4.0 0 F. Desirability $ 4.0 0 G. Owner's Reason for selling $ 6.0 0 H. Length of time current owner has owned $ 4.0 0 I. Length of time the firm has been in business $ 6.0 0 J. Profitability $ 5.0 0 K. Location $ 5.0 0
"All financial and business information contained herein was provided by the management of the business. The SBDC assisted in compiling the data and presenting in the format shown, and makes no claims regarding the
accuracy of the presentation."
L. Entry barriers $ 5.0 0 M. Customer Base $ 5.0 0 N. Technology $ 3.0 0 G. Total $ 62.5 0 H. Total divided by 14 $ 4.5 0
12 Value of Excess EarningsA. Excess Earnings $ 73,200 $0 B. Multiple Rating $ 4.5 0 C. Value of Excess Earnings $ 326,786 $0
13 Total Business Value:A. Asset Value $ 260,000 $0 B. Multiple Rating $ 326,786 $0 C. TOTAL BUSINESS VALUE $ 586,786 $0 Value of turn key operation $ 25,000 $0 D. Final Business Value $ 611,786 $0
"All financial and business information contained herein was provided by the management of the business. The SBDC assisted in compiling the data and presenting in the format shown, and makes no claims regarding the
accuracy of the presentation."
BUSINESS VALUATION ANALYSIS Notes Last Annual
COGSinclude depreciation exp
$ - YearlyLast years
at FMVat FMV
at costat costat costat cost
book or FMVFurniture and Fixtures
lowest cash should go
highest rate allowed
rounded
minus
high risk, low #more competitors, lower #what's the future?more desirable, higher #higher growth, higher #to own the companybetter the reason, higher #over 10years a 6, down from thereover 10 years a 6, down from thereindustry std a 3 or 4, adjust from theremore desirable, higher #
"All financial and business information contained herein was provided by the management of the business. The SBDC assisted in compiling the data and presenting in the format shown, and makes no claims regarding the
accuracy of the presentation."
harder to start, higher the numbermore loyal provable base, higher #higher tech, higher #
Average of the above numbers
the mulitplier
An estimate, usually $15 -$25K
"All financial and business information contained herein was provided by the management of the business. The SBDC assisted in compiling the data and presenting in the format shown, and makes no claims regarding the
accuracy of the presentation."
Company NameDate
Small Business Valuation Analysis Summary
Valuation Technique
1) Capitalized Adjusted Earnings Value $ 318,333 2) Discounted Future Earnings Value $ 299,173 3) Market Valuation Value $0
Average of Above Techniques $ 205,835
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