Business Valuation Short Presentation

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Short presentation on valuation to MBA class.

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Business Valuation Short Presentation

  1. 1. Business Valuation<br />Presented by: Matthew Waymire CPA<br />United Business Brokers<br />Phone: 702-932-0992<br />https://www.linkedin.com/e/fpf/18486908<br />Email: Matt@UnitedBusinessBrokers.com<br />
  2. 2. Basic of Valuation<br />Simple Equation<br />Cash Flow X Multiplier = Value<br />
  3. 3. What is cash flow?<br />99% of the time it is a variation of EBITDA<br />
  4. 4. What is the multiplier?<br />The inverse of the discount rate.<br />The US Stock Market is trading at 16.6 times earnings or a rate of return of 6%<br />Small Privately held business: A multiplier of 2.38<br /> 1 divided by 2.38<br />Or 42%<br />
  5. 5. What are some items that affect the multiplier?<br />Quality of Books and Records<br />Growth Potential<br />Quality of Competition<br />In Place Quality Management<br />In Place Quality Workforce<br />In Place Procedures<br />Intangibles<br />Know How<br />Patents etc.<br />
  6. 6. What You Need to Understand About Selling Businesses In Order to Actually Sell Your Business<br />It has to make sense for the buyer to buy<br />The only real valid method of valuation is finding out what someone will actually pay for the business<br />
  7. 7. To Sell your Business You Need to Anticipate Where Your Potential Buyer is Coming From<br />For most business with Seller’s Net Cash Flow (SDE) under $500,000 you will be dealing with a financial buyer<br />For businesses with Seller’s Net Cash Flow over $500,000 you may begin to deal with Strategic and Investment Buyers.<br />
  8. 8. All Financial Buyers Need:<br />A reasonable salary<br />Money to pay the acquisition loan<br />A cash return on the down payment<br />Many are forced Entrepreneurs. <br />They are buying a Job<br />
  9. 9. What Financial Buyer’s Mentally Want:<br />Control over destiny<br />Job for life<br />Will not be downsized<br />Opportunity to make more<br />Earning potential <br />Build value in an asset<br />Maybe the buyer will sell in several years?<br />
  10. 10. All Investment buyers want:<br />Very high rate of return on their money<br />As low risk as possible<br />On-going management<br />
  11. 11. All Strategic Buyers Want<br />Vertical or Horizontal Integration<br />Economies of scale<br />Price limit (in general) for publically traded companies = stock multiplier for the company<br />Roll ups<br />

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