Whether you are an experienced business appraiser or new to business valuation, you will find plenty of helpful tips and suggestions with ValuAdder.
The ValuAdder software comes with a full-featured Learning and Information Center integrated into the Help system. You can get a quick orientation on the business valuation process by simply clicking on the Overview from the main application window as you run your ValuAdder.
Business valuation guide is a major part of the Learning and Information Center. Here you will find a comprehensive overview of the business valuation process, approaches used, and help on how to make the choices of methods that work for you.
Whenever you create a new valuation method or deal structuring tool, you can get immediate help by clicking on the Learn More button in the tool selection window. This takes you directly to the method tutorial. You can review the fundamentals of the valuation technique before you start using it.
More comfortable with a book format? No problem. The entire contents of the Learning and Info Center are also available in a book format. You can extract the book as a PDF document right from the Help menu. Save the book on your computer to view the document or print any portion of the book for your use.
Much of business valuation is defining the terms used. ValuAdder resources contain an extensive Glossary where the terms you are likely to run into are defined and explained. Use the plain English explanations and examples to ramp up quickly on the key aspects of business valuation and start using the tools in your work.
In addition to the tutorials on each business valuation method available in ValuAdder, there are helpful how-to sections that offer you a concise description of how to use the tools. Use these sections as a reminder of what goes into each calculation or to make sure you have all the inputs available and ready for use.
Before you can use any method for business valuation you need to prepare a number of key inputs that the methods require. Usually, you would start your analysis with a set of the typical business financial statements such as its income statements and balance sheets.
But the accounting financial statements are just a starting point. The statements are usually prepared for tax filing purposes. One objective business owners have is to minimize taxable income. Thus the financial statements may not show the business earning potential in the best possible light.
That is the main reason why the company’s financials typically require a number of adjustments, known to business appraisers as the financial statement reconstruction or recasting. The goal of recasting is to reveal the earning power of the business focusing on cash flow metrics such as the net cash flow or discretionary earnings (SDE).
Business value is about the earnings you can expect from the business in the future. Historic financial statements are useful to the extent that they assist you in generating an accurate earnings forecast. In fact, the business valuation methods you are likely to use, such as the discounted cash flow technique, require that you provide a future cash flow projection.
In addition to establishing the cash flow, you would need to assess the company’s risk. This step gives you the important discount and capitalization rates to use in your business valuation calculations.
Valuation methods under the asset approach will require that you review and adjust the business asset base and its liabilities in order to establish its current economic position. This may be quite different from the cost-basis financial picture that you get from a typical accounting balance sheet.
ValuAdder software includes financial statement recasting worksheets that help you complete all these important tasks:
- analyze and adjust your historic income statements
- generate an accurate earnings forecast
- review and adjust the values of assets and liabilities
- assess the company’s risk and calculate the discount and capitalization rates
- prepare all the inputs you need for the various business valuation methods
ValuAdder worksheets also include these important figures you may find useful in your valuation:
Based on your inputs, ValuAdder worksheets summarize the inputs to use for any of the business valuation methods. The worksheets also capture all your financial statements and adjustments on a single page that you can easily share with others, print out or include into a report.
Be sure to review and adjust your historic financial statements in order to make this information useful in your business valuation.
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