Projected Revenue Growth
This slider reflects the company’s intermediate / long-term rate of growth in terms of “Top line” revenues. Specifically, the projected 5-year “compound annual growth rate” (CAGR). The higher the projected revenue growth, the higher the future profits and current business value. The combination of revenue growth rate and long-term EBITDA margin will impact the discounted cash flow paradigm which is particularly important for valuing high-growth, high-profit companies.
Long-Term EBITDA Margin
This slider represents expectations as to the long-run operating cash flow (EBITDA) margin in future periods once the firm is in “steady state” mode; e.g., year-5 in the company’s forecast. EBITDA is a measure of a company’s operating profitability and equals earnings before interest, tax, depreciation and amortization. EBITDA Margin is defined as EBITDA divided by total revenues. The combination of Revenue Growth Rate and Long-Term EBITDA Margin will impact the Discounted Cash Flow paradigm, which is particularly important for value in high-growth, high-profit companies.
Percent of Business Recurring
This indicator is a key risk determinant in that building a client base which returns year after year will reduce the riskiness of future cash flows (lower risk, higher value). Repeat customers are easier to work with and tend to spend more money and refer new customers, enhancing their value.
Intellectual Property
Does the business have any intellectual property or goodwill that should be considered? The effect of IP on the final multiple is relatively minimal, and this question is largely included for data gathering purposes.
Percent of Sales from Top Customers
How much of the business’s revenue comes from a small portion of the customer base? Concentration of revenue streams may have an impact on the businesses value.
Impact of Owner Leaving
An owner’s departure may have a significant impact on business value. In a succession planning scenario this is a key question to address for purposes of ensuring that revenue generating relationships are transferred ahead of or as part of a sale. This question can also show the impact of a key person leaving the organization and may lead to a key-person insurance coverage conversation.
Rent or Own
If your business owns the building or property you operate from, knowing the value of your business with property included may be of interest. When the property is owned by the business entity and property value details are entered, an “including real estate” value will appear with the estimated business valuation report. Property value will also have an effect on the Asset Sale AND Liquidation Values found in the valuation report.
Remaining Mortgage on Owned Property
This amount should be included in the liability step . If it was not included, please update the applicable field. This information entered here will be used for documentation purposes in the report as well.
True Market Level Monthly Rent
The true amount of monthly rent that would normally be paid to a third-party owner on an arm’s length basis.
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