If you're exiting a business, you need to have an idea of what your company is worth so you know which offers to take. Generational Equity explores common valuation methods, factors of your business that will be examined, what a valuation can reveal and more.

1. How To Perform
A Business Valuation
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2. Before we start,
you need to understand…
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There is no one-size-fits-all formula.
Creating a useful valuation is a
combination of art and science,
experience and methodologies.

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Why get a business valuation?
Before you approach buyers, you need
to have an idea of what your company
is worth. Without that knowledge,
how will you know which offers to take?

5. Common Valuation Methods
• Public market comparable analysis
• Identifying precedent M&A transactions
• Discounted cash flow analysis
• Book- or asset-based valuation approaches
• Applying multiples to revenue, EBITDA (earnings
before interest, taxes, depreciation, and
amortization), or net income
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How do you decide
which method(s) to use?
• Historic and projected growth of your business
• Experience of analysts and deal makers
• A combination of all methods in many cases

7. WARNING:
Avoid anyone
who tells you
they can estimate your
company’s value
in your initial meeting.
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8. Because the first step in
any business valuation should be
a thorough evaluation of your company,
looking at things like...
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• Customer base
• Who are the customers, and how many are
there?
• Is there customer concentration?
• Are contracts transferable?
• Supplier base
• Are there supplier concentration issues?
• How difficult would it be to switch suppliers?
• Can the supplier go directly to the end user?
• People
• Can the company operate without the owner?
• Does the company have a skilled team?
• And much more

10. The evaluation process can be long and frustrating,
but it can reveal:
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1. Intangible assets and what makes your
company unique
2. Things you can improve to enhance
your value

11. During the valuation process, you’ll
analyze historical financial statements and
recast them before creating the
3-year to 5-year projections.
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12. The accepted accounting principle of removing or
adjusting items on your financial statements that are
unrelated to the ongoing business, such as
superfluous, excessive, or discretionary expenses,
and nonrecurring revenues and expenses.
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What is recasting?

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Example Items
Removed During Recasting
• Non-fair-market rent charged to the company for
property personally owned by the proprietor
• Assets on the balance sheet that are not required for
ongoing operations
• Salaries for the owner and spouse that are not at fair
market
• Duplicative overhead costs (under the assumption of
new management)
• Inactive family members’ salaries
• Vacations and trips that are not business-related

14. If you don’t recast, you may be
understating your company’s true
profitability.
If you’re understating profitability,
you’re leaving money on the table.
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15. Make sure you can explain
your recast financials.
Buyers will expect an outline – in great detail – of
what is being recast and why.
If you hire a professional firm to do your
recasting, make sure they will stand behind their
valuation and represent you in the market.
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16. Final Step
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Combine everything you learned during the
evaluation – historical results, unique assets, the
company’s operating environment, recast
financials – and create your 5-year pro forma
projections.

17. Named M&A Advisor’s
2014 & 2015 Valuation Firm of the Year
www.genequityco.com
info-us@genequityco.com • 877-217-8240