1. Beginning Business Valuation
Barry Goodman
CFA, ASA, CPA/ABV, CBA, CFP
Advanced Valuation Analytics, Ltd.

2. Capitalization Of Cash Flow Method
Estimate the capitalization rate.
Estimate the cash flow capacity.
Divide the cash flow capacity by the capitalization rate.

3. Capitalization Rate
Factor, expressed in %, used to convert anticipated benefits into a current value
Considers interest rates, rates of return expected by the market, and risk of the anticipated benefits

4. Cash Flow Capacity The company’s ability to produce profit
Looks at historical profit – not anticipated future profit
Estimation Methods
Most recent year
Mean or weighted average
Another way to estimate cash flow capacity-
Projected Year

5. Gradual Increase

6. Erratic History

7. Hockey Stick

8. Sources of Market Data Publicly-traded stocks Iba data base
Pratt’s stats
Done deals
Zweig’s valuation survey
Other specialized sources

9. Company Results Net income EBITDA Cash flow
Owner’s discretionary cash flow
Revenue

10. Discounts/Premiums