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BUSINESS EXAMPLE

Example Org.
Johannesburg, Gauteng   Brokered By: Administrator
Asking Price: R 1,700,000.00 Sales Revenue: R 32,292,670.00 Cash Flow: R 10,000.00



Business Information

SWOT analysis

Human Resource Information

Ownership Structure

Selling Proposition

Business Processes

Assets

Liabilities

Financial Information

Invoicing

Gallery

Documents
Asset Replacement & Running
Costs Valuation
Current Asset Value minus
Liabilities Valuation
Discounted Cash Flow
Valuation

Business Information

Business Information
Extended Information Enabled

Business Identifier (used in Business Search Result)

Example Org.

Current Status

In Talks

Looking For

Partner

Company Start Date

2008-09-19

Financial Year End

September

Sector

Retail

Industry

Other

Business Description

This business serves as an example on BusinessPortal-SA and all data added is fictional. You will not be able to add it to your shortlist or message the business owner and it will not come up in any searches on BusinessPortal-SA. Some factors in the Human Resources Information section and in the Valuations are time dependent. This is how they would have appeared in March 2016. One of the existing partners wants to sell 10% of his shares. Looking for somebody dynamic with contacts in the industry.

Registered for VAT

Yes

Franchise

No

Type of Business

CC

Province

Gauteng

City

Johannesburg

Business Environment

A fictional office park

Supplier Types

Paper, Raw Materials for Prodution, Electricity, IT Services, Telecommunications, Courier Services, Catering, Marketing, Accounting, etc.

Client Types

Final users of products.

Legal Regulation

Member of a fictional regulatory body. No pending lawsuits outstanding. New regulations in the industry may impact sales in the future.

Asking Price (R)

1,700,000.00

Annual Turnover (R)

32,292,670.00

Monthly Free Cash Flow (R)

10,000.00

Estimate of Business Value (R)

10,400,000.00

Estimate based on

Assets - Liabilities + investment amount at 12% to provide equivalent income to free cash flow.

SWOT analysis

SWOT analysis
Extended Information Enabled

Strengths

Good name in the industry. Very secure supply line. Strong work ethic of employees. High financial barriers to entry in the industry

Weaknesses

Very reliant on key employees. Administration is not well organised. Not ideally placed to serve client base.

Opportunities

Moving to more suited premises. Expanding into new markets. Finding new clients. Cutting costs of transport and production.

Threats

One strong competitor with good R & D. New products in development but unlikely to come to market until 2017.

Human Resource Information

Human Resource Information
Extended Information Enabled

Board Members

No Board Members entered for this business


Partners

Partner Type Time at Company Highest Education/Certification Annual Salary Other Benefits Other Benefits Explanation Ownership % Voting Rights % Entered as Board Member
Silent 62 Months Honours Degree R 0.00 R 180,000.00 Retainer 10.00% 0.00%
Active 62 Months Masters Degree R 1,080,000.00 R 108,000.00 Car and Phone Allowance 50.00% 50.00%
Active 30 Months Honours Degree R 1,500,000.00 R 0.00 30.00% 30.00%


Managers

Manager Type Alternate Manager Type Description Time at Company Highest Education/Certification Annual Salary Other Benefits Other Benefits Explanation Ownership % Voting Rights % Entered as Board Member Entered as Partner
Financial 15 Months Bachelors Degree R 600,000.00 R 0.00 0.00% 10.00%
Sales 62 Months Masters Degree R 1,080,000.00 R 108,000.00 Car and Phone Allowance 50.00% 50.00% Yes
Operations 30 Months Honours Degree R 1,500,000.00 R 0.00 30.00% 30.00% Yes

Estimated Annual Increase/Decline (%)

0.00

Estimated Annual Turnover (%)

0.00


Employees

Employee Type Alternate Employee Type Description Job Description Time at Company Highest
Education/Certification
Annual Salary Other Benefits Other Benefits Explanation Ownership % Voting Rights % Unionised Entered as Board Member Entered as Partner Entered as Manager
Operations Logistics and Transportation 40 Months Bachelors Degree R 540,000.00 R 0.00 0.00% 0.00% No
Operations Logistics and Transportation 32 Months Secondary School R 450,000.00 R 0.00 0.00% 0.00% No
Custodial Cleaner 15 Months Secondary School R 180,000.00 R 0.00 0.00% 0.00% No
Sales Sales Team 20 Months Technical Diploma R 570,000.00 R 60,000.00 Commission 0.00% 0.00% No
Administration Finance and Logistics 12 Months Bachelors Degree R 450,000.00 R 0.00 0.00% 0.00% No
Sales Sales Team 34 Months Technical Diploma R 600,000.00 R 60,000.00 Commission 0.00% 0.00% No
Multiple Operations and Administration Training for Finance, Logistics and Transportation 6 Months Secondary School R 360,000.00 R 0.00 0.00% 0.00% No
Operations Engineer 36 Months Honours Degree R 1,080,000.00 R 0.00 0.00% 0.00% No
Operations Engineer 60 Months Honours Degree R 1,200,000.00 R 0.00 0.00% 0.00% No

Estimated Annual Increase/Decline (%)

0.00

Estimated Annual Turnover (%)

5.00


Ownership Structure

Ownership Structure
Extended Information Enabled

Ownership Distribution

Private Ownership

Business Ownership

Board Members Ownership % 0.00%
Partners Ownership % 90.00%
Managers Ownership % 0.00%
Employees Ownership % 0.00%
First Business (%)
10.00
Second Business (%)
0.00
Remaining Business (%)
0.00
Public Ownership (%)
0.00
Voluntary (non dividend paying) Ownership (%)
0.00

Ownership Distribution Graph






Voting Weights

Private Voting Weight

Business Voting Weight

Board Members Voting Weight % 0.00%
Partners Voting Weight % 80.00%
Managers Voting Weight % 10.00%
Employees Voting Weight % 0.00%
First Business (%)
10.00
Second Business (%)
0.00
Remaining Business (%)
0.00
Public Voting Weight (%)
0.00
Voluntary (non dividend) Voting Weight (%)
0.00
Alternative Voting Right
Oldest Partner has the right to Vito decisions.

Voting Distribution Graph





Selling Proposition

Selling Proposition
Extended Information Enabled

Products

Cost and Price Structure Comparison to Competing Products – If the Best Competing Product has a Rating of 10 my Product rates at: Marketing Per Product
Product Category Product or Production Cost Markup Current Selling Price Quality Fit for customer Affordability Availability Being in
Customers' Mind
Marketing Approach Monthly External
Marketing Spend
Product Type A R 50.00 20.00% R 60.00 9 12 12 6 6 Direct/Targeted R 5,000.00
Product Type B R 150.00 6.67% R 160.00 5 5 13 13 8 Media Advertising R 30,000.00


Services

Cost and Price Structure Comparison to Competing Services – If the Best Competing Service has a Rating of 10 my Service rates at: Marketing Per Service
Service Classes Cost/hour to produce service Markup Average Billing price Alternative Service Pricing Customer tailoring Affordability Timeousness Being in
Customers' Mind
Marketing Approach Monthly External
Marketing Spend
Rent Cottage on Property R 0.00 0.00% R 0.00 12000/Month 10 10 10 10 Word of Mouth R 0.00
Service Type A R 250.00 60.00% R 400.00 10 10 10 10 Business to Business R 0.00
Service Type B R 150.00 200.00% R 450.00 15 8 15 15 Business to Business R 0.00
Service Type C R 50.00 200.00% R 150.00 Plus km driven at R5/km 10 10 8 8 Business to Business R 0.00


Business Processes

Business Processes
Extended Information Enabled

Products

Purchasing of Products, Part-Products (requiring assembly) or Raw Materials for the production of Products Product or Production Cost (Estimate % of Spend towards Product Manufacturing/Purchase Price pre Sale for…) Sales
Product Category Product Type Payment terms Alternative Description Delivery terms Purchasing Labour Transport Services Storage of raw materials/part products Storage of final Product Commission % paid on Sales Variable Commission paid Rules for Variable Commission Customer Payment Terms Alternative Description Delivery Terms Sales Effort towards Product
Product Type A Final Product 90 days 14 days 70.00% 5.00% 15.00% 0.00% 0.00% 10.00% 5.00% No 30 days 7 days 35.00%
Product Type B Part Product (requires assembly) 90 days 30 days 45.00% 30.00% 5.00% 5.00% 8.00% 8.00% 5.00% No 30 days 14 days 65.00%


Services

Cost/Hour to produce Service (Estimate % of Service Production Spend per Service) Sales
Service Classes Labour Licence Fees Services Consumables Commission % paid on Sales Variable Commission paid Rules for Variable Commission Customer Payment Terms Alternative Description Delivery Terms Sales Effort towards Service
Service Type A 80.00% 10.00% 5.00% 5.00% 0.00% No 30 days Delivery before payment 0.00%
Service Type B 60.00% 20.00% 0.00% 20.00% 0.00% No 30 days Delivery before payment 0.00%
Service Type C 35.00% 0.00% 5.00% 60.00% 0.00% No 7 days 1 day 0.00%
Rent Cottage on Property 0.00% 0.00% 50.00% 50.00% 0.00% No 30 days Delivery before payment 0.00%


Assets

Assets
Extended Information Enabled

Income Generating (necessary for production) Assets

Raw Materials

Description Purchase Date Purchase Price Selling Price (on purchase date)
Raw Materials for Product Type B 2014-09-03 R 1,000,000.00 R 800,000.00

Stock on hand

Amount of stock available for sale
R 2,500,000.00

Equipment

Description Purchase Date Purchase Price Selling Price (on purchase date)
Truck 2010-08-19 R 360,000.00 R 240,000.00
Truck 2013-07-19 R 450,000.00 R 400,000.00
Computers 2012-05-11 R 40,000.00 R 30,000.00

Property (if rented out)

No Property (if rented out) added

Business Interests

Description Stake Purchase Date Purchase Price Selling Price (if sold today)
Swapped for 10% stake in Example Org. 20.00% 2015-08-19 R 0.00 R 0.00

Loans Given or Negative Balance in Loan Account

Loans Given or Negative Balance in Loan Account     Last modified: 2014-01-03
Description Amount Repayment Condition Interest Rate Monthly Repayment
Outside Party R 360,000.00 Loan to Partners Family 7.00% R 16,000.00


Non-Income Generating Assets

Property (if not rented out)

Description Purchase Date Purchase Price Selling Price (if sold today)
Business Property 2010-02-25 R 3,600,000.00 R 4,500,000.00

Other Non-income generating Assets

No Other Non-income generating Assets added


Liabilities

Liabilities
Extended Information Enabled

Outstanding Invoices owed to Suppliers for Raw Materials, Stock and/or Consumables and Other Monthly Costs

 
Total Due (R)

450,000.00

Less than 7 days late (R)

40,000.00

Between 7 and 14 days late (R)

0.00

Between 14 and 30 days late (R)

0.00

Between 30 and 60 days late (R)

0.00

More than 60 days late (R)

0.00

Not to be paid (R)

16,000.00

Reason for non-payment

Defective stock that wasn't retrieved.

As at:

2014-01-01


Outstanding Debts on Assets

Last modified: 2014-06-23
Asset Class Outstanding Amount Remaining Term Monthly Repayment Interest Rate Repayments Up To Date Months Overdue
Property (if not rented out) R 1,600,000.00 84 Months R 50,000.00 6.00% Yes 0 Months
Motor Vehicles R 160,000.00 24 Months R 5,000.00 7.00% Yes 0 Months


Outstanding Loans or Positive Balance in Loan Account

Last modified: 2013-10-03
Loan Type Outstanding Amount Repayment Conditions Interest Rate Monthly Repayment
Partners R 500,000.00 Interest paid only 12.00% R 5,000.00


Other Outstanding Loans

Last modified: 2014-06-24
Loan Name Outstanding Amount Repayment Conditions Interest Rate Monthly Repayment
Starting Capital R 300,000.00 Interest paid only 12.00% R 3,000.00


Outstanding Salaries

No Outstanding Salaries added


Unsellable Stock

Last modified: 2014-01-03
Outstanding Amount
R 120,000.00


Other Monthly Costs

No Other Monthly Costs added


Financial Information

Financial Information
Extended Information Enabled

Account Information

Last modified: 2014-01-03
Account Type Balance Interest Rate
(+ve Balance)
Interest Rate
(-ve Balance)
Overdraft/Credit/
Access Bond/
Savings Available Funds
Cheque R 350,000.00 3.00% 17.00% R 1,000,000.00
Cheque R -100,000.00 4.00% 13.00% R 400,000.00
Credit R 30,000.00 3.00% 17.00% R 50,000.00
Property Loan R -1,600,000.00 0.00% 6.00% R 400,000.00


Income Recovery Rate

Estimate % of Payments


On or before
payment date
87.00
Less than 7 days late
9.00
Between 7 and
14 days late
0.00
Between 14 and 30 days late
0.00
Between 30 and 60 days late
3.80
More than 60
days late
0.00
 
Unrecoverable
0.20

Income Recovery Graph





Current Expected Income

Last modified: 2014-01-03

Total Due (R)


1,200,000.00

Total Overdue (R)


160,000.00


Invoicing

Invoicing
Extended Information Enabled

Products

Last modified: 2014-01-07
Forecast Annual Invoicing Amounts Forecast Monthly Invoicing Amounts for Next Year Historical Monthly Invoicing Amounts for Last Year Historical Annual Invoicing Amounts
Product Category Year 5 Year 4 Year 3 Year 2 Month 12 Month 11 Month 10 Month 9 Month 8 Month 7 Month 6 Month 5 Month 4 Month 3 Month 2 Month 1 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 2 Year 3 Year 4 Year 5
Product Type A R 9,540,000.00 R 9,452,000.00 R 7,470,000.00 R 6,570,000.00 R 688,000.00 R 668,000.00 R 767,000.00 R 656,000.00 R 590,000.00 R 656,000.00 R 845,000.00 R 684,000.00 R 601,000.00 R 959,000.00 R 405,000.00 R 415,000.00 R 625,000.00 R 715,000.00 R 615,000.00 R 555,000.00 R 785,000.00 R 640,000.00 R 525,000.00 R 760,000.00 R 565,000.00 R 890,000.00 R 390,000.00 R 395,000.00 R 8,125,000.00 R 7,445,000.00 R 6,600,000.00 R 8,000,000.00
Product Type B R 30,000,000.00 R 28,000,000.00 R 26,000,000.00 R 25,000,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,900,000.00 R 1,950,000.00 R 1,725,000.00 R 1,725,000.00 R 2,175,000.00 R 1,875,000.00 R 1,845,000.00 R 2,130,000.00 R 2,130,000.00 R 2,130,000.00 R 1,095,000.00 R 1,095,000.00 R 1,575,000.00 R 24,000,000.00 R 24,000,000.00 R 21,750,000.00 R 19,800,000.00
Totals  R 39,540,000.00 R 37,452,000.00 R 33,470,000.00 R 31,570,000.00 R 2,568,000.00 R 2,568,000.00 R 2,667,000.00 R 2,556,000.00 R 2,490,000.00 R 2,556,000.00 R 2,745,000.00 R 2,584,000.00 R 2,501,000.00 R 2,859,000.00 R 2,305,000.00 R 2,315,000.00 R 2,575,000.00 R 2,440,000.00 R 2,340,000.00 R 2,730,000.00 R 2,660,000.00 R 2,485,000.00 R 2,655,000.00 R 2,890,000.00 R 2,695,000.00 R 1,985,000.00 R 1,485,000.00 R 1,970,000.00 R 32,125,000.00 R 31,445,000.00 R 28,350,000.00 R 27,800,000.00


Services

Last modified: 2014-01-07
Forecast Annual Invoicing Amounts Forecast Monthly Invoicing Amounts for Next Year Historical Monthly Invoicing Amounts for Last Year Historical Annual Invoicing Amounts
Service Classes Year 5 Year 4 Year 3 Year 2 Month 12 Month 11 Month 10 Month 9 Month 8 Month 7 Month 6 Month 5 Month 4 Month 3 Month 2 Month 1 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 2 Year 3 Year 4 Year 5
Rent Cottage on Property R 228,400.00 R 207,636.00 R 188,760.00 R 171,600.00 R 13,000.00 R 13,000.00 R 13,000.00 R 13,000.00 R 13,000.00 R 13,000.00 R 13,000.00 R 13,000.00 R 13,000.00 R 13,000.00 R 13,000.00 R 13,000.00 R 12,000.00 R 12,000.00 R 12,000.00 R 12,000.00 R 12,000.00 R 12,000.00 R 11,000.00 R 11,000.00 R 11,000.00 R 11,000.00 R 11,000.00 R 11,000.00 R 126,000.00 R 116,000.00 R 90,000.00 R 85,000.00
Service Type A R 1,600,000.00 R 1,400,000.00 R 1,200,000.00 R 1,000,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 75,000.00 R 83,000.00 R 67,000.00 R 50,000.00 R 133,000.00 R 83,000.00 R 75,000.00 R 83,000.00 R 42,000.00 R 100,000.00 R 58,000.00 R 42,000.00 R 833,000.00 R 720,000.00 R 420,000.00 R 330,000.00
Service Type B R 1,700,000.00 R 1,600,000.00 R 1,400,000.00 R 1,200,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 100,000.00 R 70,000.00 R 160,000.00 R 0.00 R 50,000.00 R 90,000.00 R 90,000.00 R 140,000.00 R 80,000.00 R 120,000.00 R 64,000.00 R 1,100,000.00 R 780,000.00 R 680,000.00 R 480,000.00
Service Type C R 1,900,000.00 R 1,700,000.00 R 1,600,000.00 R 1,500,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 120,000.00 R 108,000.00 R 90,000.00 R 146,000.00 R 100,000.00 R 100,000.00 R 122,000.00 R 128,000.00 R 96,000.00 R 98,000.00 R 70,000.00 R 50,000.00 R 54,000.00 R 1,284,000.00 R 1,250,000.00 R 850,000.00 R 778,000.00
Totals  R 5,428,400.00 R 4,907,636.00 R 4,388,760.00 R 3,871,600.00 R 308,000.00 R 308,000.00 R 308,000.00 R 308,000.00 R 308,000.00 R 308,000.00 R 308,000.00 R 308,000.00 R 308,000.00 R 308,000.00 R 308,000.00 R 308,000.00 R 295,000.00 R 285,000.00 R 295,000.00 R 322,000.00 R 245,000.00 R 267,000.00 R 304,000.00 R 280,000.00 R 291,000.00 R 261,000.00 R 239,000.00 R 171,000.00 R 3,343,000.00 R 2,866,000.00 R 2,040,000.00 R 1,673,000.00


Gallery

Gallery
Extended Information Enabled





DSC_1221.JPG

DSC_1595.JPG

Documents

Documents
Extended Information Enabled
No Documents Added

Asset Replacement and Running Costs Valuation

Business Valuation
All Information Available to Business Editors Only

General Comments on Business Valuations

Business Valuations are based on the information added into the Information Sheets and populate as the information is added. If the information is incomplete or inaccurate, it will affect the accuracy of the valuation. These valuations will state assumptions and calculations as far as possible to help you see where the value of your business could be improved. Hover your cursor over or click on table headings with a shaded corner for more information.

Note that, even though these valuations are based on this businesses "management account" information entered, the valuation approach may not be appropriate to the type of business being valued. The final value of a business is the price at which a willing seller will agree with a willing buyer. These valuations act as an informative guide for the range of this businesses value.

This valuation is for 100% of the businesses shares.

For more background information on the valuation principles and assumptions as well as their relevance to this business, please refer to my blog, Business Valuation: A "How to" guide.



Asset Replacement and Running Costs Valuation

The Asset Replacement and Running Costs Valuation is based on the value starting an equivalent company with comparable assets (bought at new prices) and a cash buffer to cover running costs for a given period. It thus represents the absolute maximum an investor should be willing to pay for a business before the option to set up a new one becomes more attractive.

This valuation can be suitable for all kinds of businesses depending on the buffer period for chosen costs. Service industries, which are not asset dependent, might have to work in a higher buffer to cover "Salaries". The buffers for "Marketing Costs", "Costs of Production", "Commission on Sales" and "Extra Monthly Liabilities" should resemble the time taken to bring products to market and develop a stable customer base. Note that this valuation does not take intangible assets (goodwill) into account. Note also that investors might pay more (per share) to buy a portion of a company if financial constraints do not allow them to set up an entire new one.

Asset Replacement Costs

Cumulative Price per Asset Class Inflated Monthly from Purchase Date by Annual Inflation Rate of...
Asset Class ...0% (Purchase Price) ...3% ...6% ...9% ...12%
Raw Materials R 1,000,000.00 R 1,077,783.27 R 1,161,400.08 R 1,251,271.76 R 1,347,848.92
Stock on Hand
(at sales price)
R 2,500,000.00 R 2,500,000.00 R 2,500,000.00 R 2,500,000.00 R 2,500,000.00
Equipment R 850,000.00 R 957,854.36 R 1,081,023.20 R 1,221,867.72 R 1,383,129.77
Property (if rented out) R - R - R - R - R -
Business Interests R 0.00 R 0.00 R 0.00 R 0.00 R 0.00
Loans Given or -ve Balance in Loan Account
(outstanding amount)
R 231,940.92 R 231,940.92 R 231,940.92 R 231,940.92 R 231,940.92
Property (if not rented out) R 3,600,000.00 R 4,319,787.02 R 5,181,136.20 R 6,211,428.67 R 7,443,253.10
Other Non-income generating Assets R - R - R - R - R -
Total Replacement Asset Value R 8,181,940.92 R 9,087,365.57 R 10,155,500.40 R 11,416,509.07 R 12,906,172.70


Monthly Costs

Cumulative Costs per Cost Class for...
Cost Class ...1 Month ...2 Months ...3 Months ...6 Months ...1 Year
Board Members
Salary & Benefits
R 0.00 R 0.00 R 0.00 R 0.00 R 0.00
Partners
Salary & Benefits
R 239,000.00 R 478,000.00 R 717,000.00 R 1,434,000.00 R 2,868,000.00
Managers
Salary & Benefits
R 50,000.00 R 100,000.00 R 150,000.00 R 300,000.00 R 600,000.00
Employees
Salary & Benefits
R 462,500.00 R 925,000.00 R 1,387,500.00 R 2,775,000.00 R 5,550,000.00
Total Salaries R 751,500.00 R 1,503,000.00 R 2,254,500.00 R 4,509,000.00 R 9,018,000.00
Marketing Costs R 35,000.00 R 70,000.00 R 105,000.00 R 210,000.00 R 420,000.00
Cost of Production R 1,817,687.50 R 3,635,375.00 R 5,453,062.50 R 10,906,125.00 R 21,812,250.00
Commission on Sales R 127,975.00 R 255,950.00 R 383,925.00 R 767,850.00 R 1,535,700.00
Liabilities
Other Monthly Costs
R - R - R - R - R -


Cumulative Costs

Asset Value Inflation Rate
6%
R 10,155,500.40
Months of Salaries Cover
3
R 2,254,500.00
Months of Marketing Costs Cover
6
R 210,000.00
Months of Cost of Production Cover
2
R 3,635,375.00
Months of Commission on Sales Cover
1
R 127,975.00
Months of Extra Liabilities Cover
1
R -
Asset Replacement and Running Costs Valuation Total R 16,383,350.40

Current Asset Value minus Liabilities

Business Valuation
All Information Available to Business Editors Only

General Comments on Business Valuations

Business Valuations are based on the information added into the Information Sheets and populate as the information is added. If the information is incomplete or inaccurate, it will affect the accuracy of the valuation. These valuations will state assumptions and calculations as far as possible to help you see where the value of your business could be improved. Hover your cursor over or click on table headings with a shaded corner for more information.

Note that, even though these valuations are based on this businesses "management account" information entered, the valuation approach may not be appropriate to the type of business being valued. The final value of a business is the price at which a willing seller will agree with a willing buyer. These valuations act as an informative guide for the range of this businesses value.

This valuation is for 100% of the businesses shares.

For more background information on the valuation principles and assumptions as well as their relevance to this business, please refer to my blog, Business Valuation: A "How to" guide.



Current Asset Value minus Liabilities Valuation

The Current Asset Value minus Liabilities Valuation is based on value of assets in the company once all liabilities have been excluded. It thus represents the absolute minimum a seller should be willing to sell a business for.

This valuation is only suitable for insolvent businesses which are being bought for their assets. If the company has a turnover and is (or has the potential to be) profitable, its valuation should be higher than the Current Asset Value minus Liabilities Valuation to compensate. The smaller the turnover (or profit) in comparison to this valuation, the closer the company value will be to the Current Asset Value minus Liabilities Valuation. Note that this valuation does not take intangible assets (goodwill) into account.

Current Asset Values

Cumulative Value per Asset Class Depreciated Annually from Purchase Date by Annual Depreciation Rate of...
Asset Class ...0% (Non-Depreciating) ...5% ...10% ...25% ...50%
Raw Materials R 800,000.00 R 722,000.00 R 648,000.00 R 450,000.00 R 200,000.00
Equipment R 670,000.00 R 572,428.68 R 487,587.60 R 294,609.38 R 111,250.00
Other Non-income generating Assets R - R - R - R - R -

Asset Class Cumulative Value per Asset Class at entered Sales Price
Property
(if rented out)
R -
Business Interests R 0.00
Property
(if not rented out)
R 4,500,000.00
Total R 4,500,000.00

Asset Class Cumulative Value per Asset Class at entered Asset Price or at outstanding amount
Stock on Hand
(at sales price)
R 2,500,000.00
Loans Given or -ve Balance in Loan Account
(outstanding amount)
R 231,940.92
Current Expected Income as at 2013-10-15 R 1,200,000.00
Total R 3,931,940.92


Financial information as at 2016-01-25

Cumulative Account Balance R 280,000.00


Liabilities

Liability Class Long-term Liabilities
Outstanding Invoices as at 2014-01-01 R 434,000.00
Outstanding Debts on Assets as at 2014-06-23
(outstanding amount)
R 741,900.90
Outstanding Loans or +ve Balance in Loan Accounts as at 2013-10-03
(outstanding amount)
R 500,000.00
Other Outstanding Loans as at 2014-06-24
(outstanding amount)
R 300,000.00
Outstanding Salaries as at 2016-02-05
(outstanding amount)
R -
Unsellable Stock as at 2014-06-25
(outstanding amount)
R 120,000.00
Total R 2,095,900.90

Liability Class Current Liabilities (Monthly Costs for 1 month)
Board Members
Salary & Benefits
R 0.00
Partners
Salary & Benefits
R 239,000.00
Managers
Salary & Benefits
R 50,000.00
Employees
Salary & Benefits
R 462,500.00
Total Salaries R 751,500.00
Marketing Costs R 35,000.00
Cost of Production R 1,817,687.50
Commission on Sales R 127,975.00
Liabilities
Other Monthly Costs
R -


Cumulative Assets and Account Balance minus Liabilities

Raw Materials
5%
R 722,000.00
Equipment
10%
R 487,587.60
Other Non-income generating Assets
Choose a Depreciation Rate
R -
Assets at Sales Price
Include
R 4,500,000.00
Assets at Asset Price or at outstanding amount
Include
R 3,931,940.92
Cumulative Account Balance
Exclude
R -
Long-term Liabilities
Include
-R 2,095,900.90
Total Salaries
Include
-R 751,500.00
Marketing Costs
Include
-R 35,000.00
Costs of Production
Include
-R 1,817,687.50
Commission on Sales
Include
-R 127,975.00
Liabilties - Other Monthly Costs
Include
-R -
Current Asset Value minus Liabilities Valuation Total R 4,813,465.12

Discounted Cash Flow Valuation

Business Valuation
All Information Available to Business Editors Only

General Comments on Business Valuations

Business Valuations are based on the information added into the Information Sheets and populate as the information is added. If the information is incomplete or inaccurate, it will affect the accuracy of the valuation. These valuations will state assumptions and calculations as far as possible to help you see where the value of your business could be improved. Hover your cursor over or click on table headings with a shaded corner for more information.

Note that, even though these valuations are based on this businesses "management account" information entered, the valuation approach may not be appropriate to the type of business being valued. The final value of a business is the price at which a willing seller will agree with a willing buyer. These valuations act as an informative guide for the range of this businesses value.

This valuation is for 100% of the businesses shares.

For more background information on the valuation principles and assumptions as well as their relevance to this business, please refer to my blog, Business Valuation: A "How to" guide.



Discounted Cash Flow Valuation

The Discounted Cash Flow Valuation is based on the amount of income a business is assumed to be able to generate in the future. It is based on forecasts of the growth of company earnings and costs and then converts the resultant Free Cash Flow to a present value by one of two methods:

*       Summing the present values of the Free Cash Flow with a Terminal Value based on company growth that is assumed to eventually be lower than inflation. This assumption comes about because mature companies earnings should approach inflation when their market is saturated.

*       Calculating an equivalent investment amount that would yield the same returns as the final year (assuming stability) of forecast results. The interest rate of this equivalent investment is an indication of the risk this business represents at that stage and should be higher than inflation.

This valuation is suitable for all businesses. It does, however, rely heavily on assumptions about the business, market and future and some factors are highly sensitive to the valuation.

Cash Flow Forecast Assumptions

Salaries Annual Inflation Rate
8%
Marketing Annual Inflation Rate
10%
Other Monthly Costs Annual Inflation Rate
6.5%
Effective Company Tax Rate
25%
Inflation Rate to discount Operating Cash Flow
6.5%
Assumed Growth of Operating Cash Flow after Year 5
2%
Equivalent Risk Interest Rate
10%

Forecast
 Year 5 (R)
 Year 4 (R)
 Year 3 (R)
 Year 2 (R)
 Year 1 (R)
 
Extra Income
0.00
0.00
0.00
0.00
0.00
 
Extra Costs
350,000.00
300,000.00
250,000.00
200,000.00
150,000.00

Cashflow Forecast

Forecast Annual Historical Annual
Income Category Year 5 Year 4 Year 3 Year 2 Year 1 Year 1
Total Entered Product Invoices R 39,460,920.00 R 37,377,096.00 R 33,403,060.00 R 31,506,860.00 R 30,652,572.00 R 28,852,180.00
Product Invoices Growth 5.58 % 11.90 % 6.02 % 2.79 % 6.24 %
Total Entered Service Invoices R 5,417,543.20 R 4,897,820.73 R 4,379,982.48 R 3,863,856.80 R 3,688,608.00 R 3,248,490.00
Service Invoices Growth 10.61 % 11.82 % 13.36 % 4.75 % 13.55 %
Loans Given or Negative Balance in Loan Account R 0.00 R 0.00 R 0.00 R 51,051.36 R 192,000.00 R 192,000.00
Extra Income R - R - R - R - R -
Total Income R 44,878,463.20 R 42,274,916.73 R 37,783,042.48 R 35,421,768.16 R 34,533,180.00 R 32,292,670.00


Forecast Annual Historical Annual
Cost Category Year 5 Year 4 Year 3 Year 2 Year 1 Year 1
Product Cost of Production R 27,240,000.00 R 25,857,833.33 R 22,976,250.00 R 21,607,500.00 R 21,227,750.00 R 19,982,395.83
Service Cost of Production R 838,333.33 R 756,666.67 R 683,333.33 R 610,000.00 R 584,500.00 R 505,008.33
Board Members
Salary & Benefits
R 0.00 R 0.00 R 0.00 R 0.00 R 0.00 R -
Partners
Salary & Benefits
R 4,214,032.92 R 3,901,882.34 R 3,612,854.02 R 3,345,235.20 R 3,097,440.00 R 2,868,000.00
Managers
Salary & Benefits
R 881,596.85 R 816,293.38 R 755,827.20 R 699,840.00 R 648,000.00 R 600,000.00
Employees
Salary & Benefits
R 8,154,770.83 R 7,550,713.73 R 6,991,401.60 R 6,473,520.00 R 5,994,000.00 R 5,550,000.00
Total Salaries R 13,250,400.60 R 12,268,889.44 R 11,360,082.82 R 10,518,595.20 R 9,739,440.00 R 9,018,000.00
Marketing Costs R 676,414.20 R 614,922.00 R 559,020.00 R 508,200.00 R 462,000.00 R 420,000.00
Commission on Sales R 1,977,000.00 R 1,872,600.00 R 1,673,500.00 R 1,578,500.00 R 1,535,700.00 R 1,445,500.00
Outstanding Debts on Assets R 0.00 R 0.00 R 0.00 R 110,511.71 R 660,000.00 R 660,000.00
Outstanding Loans or +ve Balance in Loan Account R 60,000.00 R 60,000.00 R 60,000.00 R 60,000.00 R 60,000.00 R 60,000.00
Other Outstanding Loans R 36,000.00 R 36,000.00 R 36,000.00 R 36,000.00 R 36,000.00 R 36,000.00
Liabilities
Outstanding Salaries
R - R - R - R - R - R -
Liabilities
Other Monthly Costs
R 0.00 R 0.00 R 0.00 R 0.00 R 0.00 R 0.00
Extra Costs R 350,000.00 R 300,000.00 R 250,000.00 R 200,000.00 R 150,000.00
Total Cost R 44,428,148.13 R 41,766,911.44 R 37,598,186.15 R 35,229,306.91 R 34,455,390.00 R 32,126,904.17


Forecast Annual Historical Annual
Summary Year 5 Year 4 Year 3 Year 2 Year 1 Year 1
Total Income R 44,878,463.20 R 42,274,916.73 R 37,783,042.48 R 35,421,768.16 R 34,533,180.00 R 32,292,670.00
Total Cost -R 44,428,148.13 -R 41,766,911.44 -R 37,598,186.15 -R 35,229,306.91 -R 34,455,390.00 -R 32,126,904.17
Total Income - Total Cost R 450,315.07 R 508,005.29 R 184,856.33 R 192,461.25 R 77,790.00 R 165,765.83
Tax -R 112,578.77 -R 127,001.32 -R 46,214.08 -R 48,115.31 -R 19,447.50 -R 41,441.46
Operating Free Cash Flow R 337,736.30 R 381,003.97 R 138,642.25 R 144,345.93 R 58,342.50 R 124,324.38
Operating Free Cash Flow Growth -11.36 % 174.81 % -3.95 % 147.41 % -53.07 %
Discounted Operating Free Cash Flow (Current Value) R 246,507.26 R 296,163.18 R 114,774.86 R 127,263.93 R 54,781.69 R 124,324.38


By Summing Discounted Operating Free Cash Flows By Equivalent investment to yield year 5 Forecast Operating Free Cash Flow
Year 1 R 54,781.69
Year 2 R 127,263.93
Year 3 R 114,774.86
Year 4 R 296,163.18
Year 5 R 246,507.26
Terminal Value R 7,993,092.49
Discounted Cash Flow Valuation Total R 8,832,583.41 R 9,495,789.62