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E Healthcare Systems Valuation Support Doc Oct 2010


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E Healthcare Systems Valuation Support Doc Oct 2010

  1. 1. VALUATION SUPPORT<br />There's plenty of ways to back into the value of our company.  Which one is right?  Depends on who you ask.  Each investor will have their favorite methodology.  We have our own favorite as well.  Our goal as an entrepreneur is to present you with a fair, unbiased valuation of our work and pain in getting our company to this current stage at this point in time.  Why not aim for the highest value?  Sure it'll boost our ego, but does not give our investor what they feel is the realistic valuation.  Instead, let us take the subjectivity out of the equation and give a fair & accurate figure based on a four step calculation factor that is averaged.<br /> <br />So what is fair?  Out of all the valuations I've seen, the best way is to do several, then average them.  We can now show you that we have done our homework and shown all the angles, it's easy to reason why a weighted average is the best representation of our company and most importantly fair to all.<br /> <br />We have used 4 methodologies.<br /> <br />1.  Current Assets & Investment (10% weight) <br /> <br />2.  5 Years Projected Net Income (25% weight) <br /> <br />3.  5 Years Projected Sales Discounted 10X (25% weight) <br /> <br />4.  Present Value of 5 Years Projected Cash Flows (40% weight) <br /> <br />Calculating the valuation based on each of the 4 metrics above, and then averaging based on the weight, you bring the high and low to a mid ground, and can justify the number as both reasonable, and possibly conservative.  Our 5 year financial forecast model has reasonable assumptions & growth rates with the numbers worked from the bottom up and supported with a sophisticated pricing model for our product. <br /> <br />E-Healthcare Systems Heartbeat Valuation Proposition:<br /> <br />1.  Current Assets & owner investment: $____<br />2.  5 Years Projected Net Income: $____<br />3.  5 Years Projected Sales Discounted 10X:  $___<br /> <br />4.  Present value of 5 Years Projected Cash Flows: $___   <br />If one chose just 1 valuation method, most likely it would be the 5 Years Sales, discounted 10 fold.  One could even argue that being discounted at a high multiple, it is a conservative approach.  Yet looking at other methods, this is the highest valuation of them.<br /> <br />Weighting the amounts at 10/25/25/40 and doing a little math, the weighted average valuation is $___.  Drastically different than the stand alone $____.  <br /> <br />A note on #1. Current Assets & Investment.  Why include it?  It will obviously be far less than the others.  While not a fair representation of the potential of our company, it adds in a base level, current figure, and it is lightly weighted.  It's all part of being conservative.  <br /> <br />Now that we have come to a valuation of $X, it becomes much easier for us to put a value on what % your investment will buy of our business.  Given our existing investments and shares granted, a Capitalization Table break down will now show how everyone's investment & share holdings relate.  We now have put a solid number down in writing of what the investment is worth and we are confident in justifying it.  <br /> <br />