1. Presented by Dale L Clack August 3, 2018
Valuing Businesses
Presented by Dale L Clack
August 3, 2018

2. About Dale Clack VP, Loan Officer - Midwest Regional Bank
SBDC Financial Consultant for 7 years
Colorado Real Estate Broker since 1994
Business Broker for 17 years
IBBA Instructor, Business Valuation for 14 years,
Taught over 1,000 business brokers nationwide
CBI – Certified Business Intermediary, IBBA
CPA – California and Michigan for 20+ years
MBA – Finance, Golden Gate University
BA – Accounting, Michigan State University

3. Steps in the Process Step 1 – What is for Sale?
This determines what methods of valuation
Step 2 – Recast Financial Information to find real economics of the Biz
Step 3 – Estimate a Selling Price

4. Step 1 – What is for Sale 100% of the business Assets vs. Stock
Answer impacts approach, methods, value
Value business separately from the real estate
What is "goodwill" and how is it valued?

5. Step 2- Recast Financial Information
Collect 3 years of data to review trends
Determine EBITDA – for value over $1Mil
Earnings Before Interest, Taxes (income), Depreciation & Amortization
Determine DE - for small biz valued up to $1M
EBITDA + fair compensation for one owner
Danger in having too many "add-backs“
Include "add ins": underinsured, fair market rent, kids work for free

6. Step 3 – Valuation Approaches
Just like in Real Estate …
Asset Approach
Add up the value of assets
Income Approach –
Capitalize an income stream
Market Approach – Sale of “Comps”
Data Bases: BizBuySell, BizComps, Pratt’s

7. Step 3 – Methods in the Approaches
Percentage of Sales
Use “comps” from a data base
Multiple of DE or EBITDA
DE: 1x – 3x
EBITDA: 3x – 5x
Capitalized Income (EBIT) to value invested capital
Build up a cap rate that is appropriate for the risk
Could vary between 20% to 50%
Reconcile the differences between methods
Which are better & why

8. Business Valuation Summary
Business valuation is a complex task
Requires expertise to do it right
There are experts to assist you
Business Brokers, CPAs, Attorneys, Business Appraisers
Advise your customer/client:
Hire an attorney
Hire a CPA with business value expertise and tax knowledge for this transaction

9. Resource “CABI” - Colorado Association of Business Intermediaries
Business Brokers with the CBI designation
Attorneys & Lenders who facilitate deals
CPAs with business valuation knowledge
URL: .com
FAQ’s
Articles library

10. Contact Information
Dale Clack
Work:
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