1. Mom & Pop Business Valuation
Dr S P Parashar
parashar.sat@gmail.com
Former Director, IIM Indore
Principal Consultant, TACM Management Education Consulting, LLP
Managing Director, Center for Safe and Sound Banking, Inc.
Oct 20, 2013
Franchise India, New Delhi

2. Session Head Points
• Reasons for Business Valuation
• Methods of Business Valuation
• How is Mom & Pop Business Valuation
Different?
• How to grow Mom & Pop Businesses into
National / Global Franchise?
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3. Reasons for Business Valuation
• Purchase / Sale of business
• Secure loans from banks (i.e. determine
collateral value)
• Buy/sell agreements between private
company shareholders and partners
• Estate planning and taxation
• Divorces
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4. Reasons for Business Valuation
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•
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Gift taxes and charitable donations
ESOPs
Management Buyouts
Litigation support
Family succession
Shareholder disputes
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5. Methods of Business Valuation
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Break-up Value
Replacement Value
Going Concern Value
Fair Market Value
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6. Methods of Fair Market Value
Estimation
• Market Approach
• Income Approach
• Multiple
• Discounted Cash flow
• Asset Approach
• Rule of Thumb
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7. Estimating Future Business
Income
Two Concepts:
• Seller’s Discretionary Income (SDE)
• EBITAD
• In case of Mom & Pop Businesses, SDE
is relevant.
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8. Determining SDE
SDE=
Net Income before tax
+ Interest
+ Depreciation
+ Owner’s compensation
+ Non-essential business expenses (Discretionary
Expenses)
+ Market Adjustments
Invariably, SDE is much higher than Net Income
because Mom & Pop businesses serve as tax shield.
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9. Growing Mom & Pop Business
into Powerful Franchise
• Real Magic is in scaling up the business.
• To overcome additional capital constraint, go
for franchising.
• To develop franchise, build SDE and Value.
• Standardize Operating Procedures and
Document.
• Help franchisees with training, set up and
operational guidance and support
• Charge Royalty but Leave value at the table.
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10. Thank you
For
 Business Diagnostics & Developing Your Franchise
 Selling Your Franchise in USA
 Buying USA Franchises
 Fast Track EB5 USA Green Card
Contact:
parashar.sat@gmail.com
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