This document discusses various techniques for valuing a business, including asset-based valuation using net assets and goodwill, profit-based valuation using PE ratios compared to equivalent public companies, and cash flow-based valuation using EBITDA multiples and DCF/NPV calculations. It also covers other factors that influence valuation such as payback periods, return on investment, buyers' considerations, industry benchmarks, and value drivers and drainers. The overall aim is to help clients increase the perceived value of their business.

1. Increasing the value of your
client's business
Tim Luscombe

2. Opportunity
Reframe your client's perception
of your fees

3. Valuation Techniques
Asset Based * Ratio(s) of Profits
*Cash flow based * Payback
Periods * ROI *Buyers Valuation
* Benchmark
All Estimating What a willing
buyer will pay to a willing seller
It is an art, not a science

4. Asset based
Value of net assets
Adjust for depreciation methods?
As above, + good will element
Market Value of net assets
Strip out cash & property

5. Profit Based
Typically P/E ratios
Value of the company
Post tax profits of the company

6. P/E Ratios
Find an equivalent public
company’s P/E Ratio
Discount that ratio for the lack of
liquidity in the market in private
companies
Apply to adjusted post tax profits
Over different periods

7. Cash Flow based
Multiples of EBITDA
Earnings before interest tax depreciation and
amortization
DCF and / or NPV calculations
Based upon forecast cashflows

8. Payback Periods
Number of years to recoup
investment
Usually between 3 and 5 years
Factors include costs of
integration and savings from
consolidation.

9. Return on Investment
ROI based upon forecast post tax profits
Enables easy comparison to alternative
investments
Different rates of return for different buyers
Rate of return is set by reference to cost of
capital

10. Buyers Valuation
Looks at the increased value of the
combined businesses
Will consider cost of capital, but also
earnings dilution (especially
important in public companies)
Estimating costs of integration but
also synergistic benefits

11. Industry Benchmarks
Often a very simple calculation
Widely known in the industry – so
almost self-fulfilling
Examples might be n x turnover or
n x contracted revenue or £x per
subscriber….

12. Why buy a business
?

13. Why would someone buy your
clients business?
+ =

14. When to sell?

15. What could acquiring your client’s
business do for the acquirer?
Ansoff
New Market
Diversificatio
penetration n
Markets
Current Market Product
extension developmen
t
Existing New
Products

16. It is a numbers game
Past profits are a guide to help
estimate future performance
Adjustments, add-backs and
fudges reduce the credibility of the
accounts

17. Value Drainers
Risk of under performance
Risk of liability issues
Greater risk equates to lower overall
value
Greater risk drives pay by performance

18. Value Drainers
Risk of under performance
Risk of liability issues
Greater risk equates to lower overall
value
Greater risk drives pay by performance

19. Value Drivers
Recurring Revenues
Consistent historic results
Systems, processes, procedures
Quality Standards
Management Team

20. We can help!
Assessment
“Where are we now?”
Value Drivers & Drainers
“good bits & bad bits”

21. We can help!
Target
“What can we get by when?”
Plan & Deliver - BSP
“Enhance good bits & eliminate bad
bits”

22. Peter Kroeger
Tim Luscombe
Mark Oxenham