INPUTS

Fixed Assets
Stock
Interest Rate
Managers Salary (Annual)
EBITDA (Annual) Net Profit
E.E.P. No Of Years
R.O.I. %

VALUATION

1. Extra Earning Potential =
2. Return On Investment =
3. Payback Period =
4. Estimated Market Value
=

Input Pointers

  • The Assets are valued at second hand value, not depreciated or replacement value;
  • The Stock is the estimated cost value;
  • The Interest is bank fixed deposit rate – 6%;
  • The Salary is what the business would pay a manager to run the business;
  • The Annual Profit includes all the perks the Owner derives from the business;
  • The ROI is between .30 and .40 average .35.

The Time Period:

  • Service businesses: 9 months to 15 months (low asset base) – Average 1 year
  • All other businesses: 18 months (1.5 years) to 30 months (2.5 years)
  • Well known franchises may go as high as 36 months (3 years) to 42 months (3.5 years)

Although each of the 3 methods may differ significantly, the average tends to give a Realistic Market Value for the business.

NB: Although Sellers and Buyers can do their own assessments, it is important to get the input of a business broker with years of experience in valuing businesses.
Please give us call or email us if you have any queries. Our team leader has been involved in thousands of transactions over the years.