1. 1897
Edison invented the stock ticker.
Large, public companies have the “luxury” of
knowing their value
2015
Nearly 250 million private companies around
the world still don’t know what they’re worth

2. Entirely Offline
Must engage financial expert
Slow
Average of 3–4 weeks
Expensive
Average of $7,500
WHY?

3. $7.7 billion will be spent this year on business valuations
Yet existing offerings are not
accessible for most small
businesses.
• Entirely offline
• Expensive
(Average of $7,500)
• Slow
(Average 3–4 weeks)

4. Business owners who don’t
know the value of their own
company and thus their true
net worth.

5. What is the SINGLE most important
QUESTION every business owner and their
financial advisor should help them with?

7. Financial Planning Capital
• Attract More Business Owner Clients.
• Complete BV Prior To Insurance Meeting.
• Indentify Life & Key Man Insurance Needs.
• Better Planning for Proceeds From Sale.
• Ensure Your Relationship Transfers.
• Attract More Business Owner
Prospects.
• Better Identify Business Owner Client
Needs.
• Offer Better Advice by Incorporating
Business Valuation.
• Retain Assets After Business Sale.
• Leading vs. Lagging Indicator.
• Identify Working Capital Needs.
• Increasing Business Valuation =
More Loan Opportunities.
• BV Decreases Portfolio Risk.
Insurance

8. BUSINESS VALUATION is the heart of
investment and RISK MANAGEMENT.
Without it, you are BLIND.
Warren E. Buffet
Chairman
Berkshire Hathaway Inc.

9. Current Challenges in Wealth Management
• Becoming the Trusted Advisor to Your Business Owner Clients.
• Delivering Better Advice.
• Acquiring More Assets Under Management.
• Retaining the Assets from the Sale of the Business After it Sells and
Transfers to the Next Generation.
• More and More Competition for a growing client base – the business owner
or entrepreneur

10. .
The Entrepreneur & The Advisor
400,000+ RIA/Advisors out there
25% of AUM coming from Business Owners
40% don’t have life insurance
How can you attract more of them: Business Valuation

12. • 30-page personalised
business valuation
report in real-time with
basic business data
input.
• Outlines 4 different
valuation estimates and
29 key performance
indicators.
• Incorporate in to all
Annual Reviews.
Your Logo
Here

13. “BizEquity is the best new product I have seen to help us market to the most important
market segment we have.”
George Brown
Chairman & CMO, Summit Trust
• Reach out to your most lucrative
market segment
• Provide better service to the
business owner
• Innovative and easy-to-use way

14. • “BizEquity has enabled me to differentiate
myself from the crowded marketplace of
wealth managers and financial planners. At
Freedom Advisors, we are offering a 360-
degree view of their business and personal
financial situation, and BizEquity helps me
educate my clients on exactly where they
stand today so we can properly plan for their
futures.”
-Chris Roehm, CFP

15. • Proprietary algorithm and
patented engine using 143
data measures.
• Existing database of over
29.4m business valuations &
over 200m data elements on
small businesses globally.
• Largest collection of
business valuation data in
the market.

16. One Business Valuation Guru’s Path
 B.A. in German and Economics, MBA in International Finance
 Ph.D coursework in Economics (2.5 years)
 Internal Audit Training with Arthur Andersen/Peat Marwick Mitchell
 Corporate Audit Experience with Schering-Plough and Motorola (2 years)
 Full-Time Faculty of Economics at Chandler-Gilbert Community College (4 years)
 Business Broker and Middle Market Specialist with VR M&A (7 years)
 Licensed Securities Broker (Series 7 and 63 - inactive) and Licensed Real Estate Agent
 Author of “Upstart Guide to Buying, Valuing and Selling Your Business”
 Certified Business Appraiser (CBA) for Gabehart Valuation Services (15 years)
 Certified Valuation Analyst (CVA) via NACVA and Business Certified Appraiser (BCA)
via ISBA. Chairman of the SBA Valuation Issues Committee of the ISBA
 Faculty of MBA Program teaching “Valuation, Sale & Acquisition of the Private Firm”
 Author of “The Business Valuation Book”
 Chief Valuation Officer of BizEquity LLC (Valuation Services and Support)
 Current Specialization and Focus on SBA Change of Ownership Business Appraisals
 Working with valuation professionals, lenders and SBA Personnel to Improve Business
Valuation Component of SOP50-10(5) Series

17. •A business appraisal tells a story…..
•Based on facts, common sense and generally accepted
valuation principles and procedures...
•There is no “correct” value as the end result is
ultimately an “opinion” or “conclusion” with
professionals varying by as much as 10% to 20%.
What is a Business Appraisal?

18. Conclusion (type of report)
Fair Market Value (standard of value)
Going Concern Basis (premise of value)
100% Interest (control value)
Target Assets (Equity) (asset sale or stock sale)
XYZ, Inc. (type of entity)
3-31-14 (valuation effective date)
Clients (intended users)
Proposed Change of Ownership Loan (purpose)
Typical Valuation Engagement

19. Historical Uses of Business Valuation
Tax and Litigation
– Estate/Gift
– Buy/Sell Agreement
– Liquidation or Reorganization
– Patent Infringement
– Partner Disputes
– Economic Damages
Financial Reporting
– Purchase Price Allocation, Impairment Testing and Stock Options and Grants, etc.
Strategic Planning/Transaction
– Value Enhancement
– Business Plan/Capital Raising
– Strategic Direction, Spin-Offs, Carve Outs, etc.
– Acquisitions, Due Diligence
– Insurance Coverage and Wealth Management
– Employee Stock Ownership Plan (ESOP)
– Internal Revenue Codes (IRC) 743, IRC 409A, etc.
– Solvency and Fairness Opinions
– Damage Assessment
– Dissenting Shareholder Actions
– Marital Dissolutions

20. How can you deliver the BEST FINANCIAL ADVICE to a business
owner if you can’t START with telling them the MARKET
VALUATION of their single LARGEST ASSET?

21. •There are 3 primary valuation approaches (income, market and
asset/cost approach).
•Each approach has a “family of different methods”.
•Each method has a “metric” and a “transformer”.
Revenues
EBITDA* Multiples
ACF**
NCFE or NCFIC***
Net Income Discount Rate or Cap Rate
Excess Earnings
•Pertinent valuation approach and methods depend on type of
business, size of business, purpose of valuation, etc. Most
appraisals rely on at least one income approach method and one
market approach method. The asset/cost method is typically used
for holding companies or unprofitable/insolvent companies.
Approaches and Methods

22. In short, the asset deal is transacted such that the buyer inherits the business “debt free”
but without working capital accounts (no cash or receivables or other liquid financial
assets) and the stock deal is transacted such that the buyer inherits all existing account
balances (all assets and all liabilities) as of the date of closing.
Stated differently, an asset deal is concluded such that:
“The seller keeps the cash, receivables and other liquid financial assets but pays
off all debts at or prior to close of escrow.”
On the other hand, a stock deal is concluded such that:
“The buyer acquires ALL assets and ALL liabilities associated with the subject
corporation as of the date of purchase (the closing date).”
Asset Sale Versus Stock Sale

23. *EBITDA stands for “Earnings Before Interest, Taxes, Depreciation and Amortization
Expense. It is often referred to as “operating cash flow” (as opposed to EBIT, which is
“operating profit”) or “poor man’s cash flow” due to its relative ease of calculation.
Importantly, many middle market companies are valued by way of EBITDA multiples.
**ACF stands for “Adjusted Cash Flow”, which is also referred to as “discretionary
earnings” or “seller’s discretionary earnings” (SDE). This is the primary “metric”
utilized to value privately-held, owner-operated companies and it represents the “pretax,
cash equivalent resources accruing to a single owner working on a full-time basis” while
emphasizing a “return on owner’s labor” paradigm. Most “small” firms will sell for
between 1 and 3 times “discretionary earnings”
***NCFE and NCFIC represent “Net Cash Flows to Equity” and “Net Cash Flows to
Invested Capital”, which are commonly used to value more substantial companies with
growth potential while representing a “return on investment” paradigm. NCFE and
NCFIC can either be “discounted” over an investment horizon or “capitalized” based on
a normalized measure which reflects an assumed rate of growth in future cash flows.
Cash Flow Measures
& Definitions

24. “Waiting to value your business
at the time of sale is like doing
retirement planning the day you
retire”
- A Smart Financial Advisor Once Said
Help your clients and prospects through
business valuation knowledge