Valuation Methods Include a Combination of:
- Discounted Cash Flow
- Book Value
- Intangible Assets
- Industry Benchmarks
- Capability
- Recent Investment
- Goodwill
- Growth Rate
Discounted Cash Flow is the easiest to apply. You take the company’s future earnings based on past performance + expected growth, project them into the future (5 or 10 years), and discount them back to today’s value.
Using a combination of all eight valuation methods, we can determine the “fair market value” of the business today.
Then, as the new growth plan kicks in, a new valuation can determine the current value of the growth plan.
In this example, assuming the business owner has 100% of the equity.
$5m EBITDA (profit)
current value 6 x earnings
= $30m valuation
The owner has 100% ownership worth $30m.
We value the business based on our know-how and see unrealized potential for windfall profits and sustainable growth. We then make projections based on these increases and re-value the business projected 5 or 10 years into the future. Then, discount the future value back to today’s dollars. This shows the increased value.
We offer the owner a choice, pay us $600k a year to manage the growth plan, for say 3 years and they make 100% of the increase.
or
We partner with the owner for a 25% stake + $300k one-time fee.
Why would the owner want to give us 25%?
Because you lack the know-how to optimize the company’s potential, partnering with a world-class business growth team (us) with a proven record virtually guarantees increasing the total size.
Most people view shares like pizza. The more you share, the less pizza you have left.
Capitalism works different from pizza.
The more you share the pie, the more valuable the pie is. Sharing = More.
We show the owner how their 75% stake is worth more to them than their current 100%
With our know-how and hands-on application, we can double your profits within a few months to a year and project the profit increases into the future.
$10m EBITDA (profit)
new value 15 x earnings
= $150m valuation