Business valuations

Learn to calculate the value of a small-to-medium sized entity (SME), analyse different valuation methods, and explain the impact of negotiation on final valuation. This workshop will also give you a framework on which to base your understanding of the factors that drive value, as well as detailing various funding approaches whether buying an SME or expanding your business.

Key topics covered

• calculation of business value using a variety of methods 
• selection of the valuation methods appropriate to your purpose in carrying out the valuation 
• identification of factors that drive value, that will be assessed as part of the due diligence process to check the valuation
• consideration of negotiation aspects involved in any business valuation

Learning outcomes

• calculate business value using a variety of methods
• select the methods appropriate for your purpose in carrying out the valuation
• identify the underlying factors which drive value and are assessed as part of the due diligence process
• consider the negotiation aspects involved in business valuations 
• appreciate the best funding for the business acquisition or expansion

Business valuations contains four sections. Valuation method for SMEs

• adjusted book value 
• asset valuation
• capitalisation of income valuation 
• capitalised earning approach 
• cash flow method
• cost to create approach (Leapfrog Start Up)
• debt assumption method
• discounted cash flow 
• excess earning method 
• multiple of earnings 
• multiplier or market valuation 
• owner benefit valuation 
• rule of thumb methods •
• tangible assets (balance sheet) methods
• value of specific intangible assets 
• shareholder value methods 
• impact of closely-held businesses and family businesses on valuation and negotiations 
• valuing management buy-outs and buy-ins
• valuing minority positions vs majority positions

Fundamental aspects of the business which impact the business value

Customers – depth of customer support and diversity of customer base, products or services, profitability, market position and competition, distribution and selling

Operations – capacity, quality and reliability, systems, supply chain management, people and organisation, organisational structure, labour markets, performance management

Financial performance – historical and due diligence aspects, forecasts, sensitivity analysis, need for additional funding to meet the plan, appropriate debt to equity structure

Aspects of business valuations and negotiation 

• selling or buying – basis of valuation and negotiation 
• it’s all in the timing 
• the business value in a great business plan