This presentation discusses and quantifies value drivers that are the basis for business valuations of strategic buyers, financial buyers and private equity investors who generally pay multiples between 3-6x adjusted EBITDA. This is a tool to help business owners better understand the drivers behind such valuations and how they may apply to their own businesses. For a FREE business valuation, simply fill out the contact form located here: http://ow.ly/UFomG

1. Value Drivers
VR Business Sales New Haven
(203) 772-3773
www.vrnutmeg.com

2. Value Drivers Overview
Generally, strategic buyers, financial buyers and private equity investors pay
multiples between 3-6x Adjusted EBITDA when purchasing a business.
Adjusted EBITDA is Earnings Before Interest, Taxes, Depreciation and
Amortization where the EBITDA is adjusted for unusual expenses and
compensation and normalized to more market based benefits and
compensations required to operate the business.
External and internal factors of a business that affect buyer perception of value
are known as value drivers. The following slides present these factors and
quantifies the characteristics impacting value by the multiple derived.
New Haven, CT
(203) 772-3773
www.vrnutmeg.com

3. Value Drivers (multiples of adjusted EBITDA)
3.0x-5.0x<3.0x 6.0x+
• Little to no
accounting systems
• No CPA involvement
• One man operation /
no management team
depth
• No professional
accounting staff
• Limited information
systems
• Compiled or
Reviewed financials
• One or two person
senior management
team
• Controller on staff
• Sophisticated
information systems
• Audited financials
• Well rounded
management team
• Full time CPA/ CFO
on staff
MANAGEMENT & FINANCIALS
New Haven, CT
(203) 772-3773
www.vrnutmeg.com

4. Value Drivers (multiples of adjusted EBITDA)
3.0x-5.0x<3.0x 6.0x+
• Completely
discretionary
• Small market size
that is shrinking
• Boom or bust
• Heavy Gov’t
pressures/regulation
that constrain the
business
• Should/need to have
your solution
• Low market
growth
• Cyclical business;
correlated to GDP
• Heavy Gov’t
pressures/regulation
that promote the
business
• Product/service is
“non discretionary”
• Large market;
growing rapidly
• Steady business;
grew through the
recession
• Little Gov’t involvement
INDUSTRY AND END MARKETS
New Haven, CT
(203) 772-3773
www.vrnutmeg.com

5. Value Drivers (multiples of adjusted EBITDA)
3.0x-5.0x<3.0x 6.0x+
• Top 3 suppliers
>90% of revenue
• No contracts
• Suppliers can sell
directly to your
customer base
• Core operations
outsourced to supplier
• Top 10 supplier
<50% of revenue
• Annual contracts
• Occasional/hybrid
competition
• Painful to switch
suppliers but not a
death blow
• No supplier more
than 5% of revenue
• Multi-year supply
agreements with
exclusivity
• Easy to bring in new
suppliers
• Exclusivity/non
compete as part of
contract
SUPPLIERS
New Haven, CT
(203) 772-3773
www.vrnutmeg.com

6. Value Drivers (multiples of adjusted EBITDA)
3.0x-5.0x<3.0x 6.0x+
• Super commodity
products with low
margins
• Thousands of
competitors; no
differentiation
• Easy for new
competitors to spring
up and copy what you
are doing
• Limited alternative to
your products with
average margins
• New entrants would
require significant
investment to compete
• Balanced market
share across the
industry
• Proprietary products
with high margins
• Market leader with
few competitors
• Significant
capabilities that would
be hard to recreate
COMPETITION
New Haven, CT
(203) 772-3773
www.vrnutmeg.com

7. Value Drivers (multiples of adjusted EBITDA)
3.0x-5.0x<3.0x 6.0x+
• Top 3 customers
>90% of revenue
• MSA with PO’s
• Owner takes all the
phone calls from
customer
• Local mom/pops are
only customers
• Top 10 customers
<50% of revenue
• Annual contracts
• Dedicated salesman
on the team
• Middle
market/regional
businesses
• No customer more
than 5% of revenue
• Multi-year contracts
• Blue chip multi-
nationals
• Full sales team that
manage customers
CUSTOMERS
• Lumpy/project
revenue
• Small, recurring
purchases
• Mix of one-
time/recurring revenue
New Haven, CT
(203) 772-3773
www.vrnutmeg.com

8. Contact US
VR Business Sales New Haven
(203) 772-3773
941 Grand Avenue
New Haven, CT 06511
Contact us with questions or to receive a
Free Business Evaluation:
http://ow.ly/UFomG