Valuation Method Examples

 

Appraisers and Analysis Table

Rating Scale Description Selected Multiplier Weight Weighted Value
Historical Profits 1.25 10 12.50
.1 - 1.0 Negative to break-even


1.1 - 2.0 Positive, but below industry norm


2.1 - 3.0 Industry Norm or above


Income Risk 1.00 9 9.00
.1 - 1.0 Continuity of income at risk


1.1 - 2.0 Steady income likely / 3-5 years old


2.1 - 3.0 Profitability assured / 5+ years old


Terms of Sale 1.50 8 12.00
.1 - 1.0 Seller requires all cash


1.1 - 2.0 Reasonable terms available


2.1 - 3.0 Exceptional terms available


Business Type 1.50 7 10.50
.1 - 1.0 Service business with few assts


1.1 - 2.0 Equipment and/or inventory are significant component of total value


2.1 - 3.0 High cost of entry, equipment and/or inventory major component of total value


Business Growth .50 6 3.00
.1 - 1.0 Declining and further decline likely


1.1 - 2.0 Flat or at inflationary levels


2.1 - 3.0 Rapid growth with more expected


Location / Facilities 2.50 5 12.50
.1 - 1.0 Less than desirable to tolerable


1.1 - 2.0 Acceptable to average


2.1 - 3.0 Above average to superior


Marketability 1.0 4 4.00
.1 - 1.0 Limited market-special skills required


1.1 - 2.0 Normal market-needed skills available


2.1 - 3.0 Large market-many qualified buyers


Desirability 1.0 3 3.00
.1 - 1.0 No status, rough or dirty work


1.1 - 2.0 Respectable and satisfactory


2.1 - 3.0 Challenging & attractive environment


Competition 2.0 2 4.00
.1 - 1.0 Highly competitive or unstable market


1.1 - 2.0 Normal competitive conditions


2.1 - 3.0 Little competition/high startup cost


Industry 2.0 1 2.00
.1 - 1.0 Declining and further decline likely


1.1 - 2.0 Flat or at inflationary levels


2.1 - 3.0 Rapid growth with more expected


Excerpted with permission. Copyright © 2003 Business Brokerage Press. All rights reserved.
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