Valley Forge Financial Group Inc. : Home
Business ValuationBusiness Valuation

BUSINESS VALUATION



This calculator may be a useful approximation tool as you consider business continuation and estate liquidity issues. The value of a business is normally defined as its fair market value, or the price at which a property would change hands between a willing buyer and a willing seller, who are both informed and under no compulsion to act. For a publicly traded company, the value can be readily obtained by the price the stock is selling over the exchange. For other businesses, this calculator provides results based on four valuation methods. This calculator should be used for estimation purposes only and not to establish a firm value for your business. For actual business planning purposes, an independent appraisal by a qualified business valuation professional should be used.

Assets:
Please provide the fair market value of the business assets. (A good source of data is the balance sheet of the business).
 $
Liabilities:
Consider all the claims against the business including accounts payable, unpaid wages, dividends declared payable and any fixed or long-term obligations. (A good source of data is the balance sheet of the business).
 $
Earnings:
Average the earnings of the business over a 3- to 5-year period. Add back in any salary bonuses to the business owners and adjust for any unusual, non-recurring items.
 $
Earnings outlook:
Classify the amount of fluctuation experienced with the business earnings. The amount of fluctuation is related to an earnings capitalization rate which is a measurement of volatility. The rate can range from 1.0 (volatile) to 9.0 (stable). You can override the default rate according to the range defined.
Stable (7.0-9.0)
Variable (4.0-6.9)
Volatile (1.0-3.9)

Earnings capitalization rate:
Borrowing interest rate:
Enter the annual amount of interest you might pay to borrow funds. (The rate should be between 1% and 20%).
 %
1-20%
Classify the risk associated with this business:
Enter the annual rate of return you would expect based on the risk of the business, ranging from safe to speculative. Each level of risk has a default rate of return assigned. You can override the default rate of return, if desired, according to the range defined.
Low (8-11.9%)
Average (12-15.9%)
Speculative (16-20%)

Expected rate of return:
%

Years goodwill may last following sale:
Goodwill factors can positively influence income when ownership of a company changes. Some goodwill factors are company name and reputation, patronage, location and special skills. (Goodwill can last from 2 to 10 years.)
 Years
(2-10)