ValuAdder Business Valuation Blog

The tradition continues – our customers ask and ValuAdder delivers: the latest release of our business valuation software gives you all the tools you need to value a business or professional practice.

What is new in ValuAdder 4.0.6

We have increased the coverage in ValuAdder business valuation Rules of Thumb to 410 industries. Every Rule of Thumb is statistically derived from latest private business sales.

Valuing a business based on market comps

You can determine the value of a business based on direct comparison to similar privately owned businesses that have sold recently. ValuAdder gives you immediate results providing the business market value range, average and median values based on your selection of the business type and just a few financial inputs.

Here are the latest industry additions:

  • Control and measurement instruments manufacturing businesses.
  • Data processing, item capture services.
  • Document production and distribution companies.
  • Document storage, archival and destruction companies.
  • Electric services, power generation and transmission service companies.
  • Radio, video, data communication equipment manufacturing firms.
  • Systems integration services, hardware and software resellers.
  • Toy and game manufacturers.

That’s in addition to the other 402 business types across all major industry sectors!

The financial recasting worksheets have been further streamlined to save you time and effort. You can start your business appraisal from the company’s usual financial statement data such as Income Statements and Balance Sheet. The worksheets give you a step-by-step way to prepare for your business valuation:

  1. Determine the company’s true earning power.
  2. Assess business risk.
  3. Prepare all the inputs you need for your business valuation calculations.

Avoiding costly mistakes in your business appraisal

The adjustments you make on the worksheets are key to accurate business appraisal. Using business valuation formulas on incorrect financial inputs is the biggest cause of mistakes in business valuation.

One example is the use of valuation multiples:

Small business owners typically seek to minimize taxable income. Hence, business cash flow is a far more accurate measure of business earning power than net income. Discretionary cash flow or net cash flow are most commonly used in business appraisals.

You need to make several critical adjustments, known as addbacks, to get from the net income to the discretionary cash flow.

For many small businesses, seller’s discretionary cash flow can be several times the net income. If you apply a valuation multiple based on cash flow to net income, the business valuation error can be on the order of 300 – 500% or more!

Another mistake is using discount and capitalization rates that have nothing to do with your business risk profile. ValuAdder lets you assess your company-specific risk – an essential requirement for accurate business valuation.

Business Valuation using ValuAdder

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