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Free Business Valuation Calculator

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Old 10-07-11
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Default Free Business Valuation Calculator

Don't spend $5,000 on getting a business valuation, get one for free in 15 minutes. I don't make a cent from this, I give this value away for branding purposes so jump in and have a go and tell me what you think.

I'm a Chartered Accountant and I get a lot of questions about how to value a business people are looking at buying or selling. The problem is that it's a very misunderstood science that gets distorted by business brokers posting 'asking prices' and not proper business valuations. Take the emotion out of it and get a second opinion. Most small business can't get their head around paying for a professional valuation, so I created a sophisticated, yet easy to use free online calculator on my website. It produces a full 7-page valuation report that you can print or forward as an email. I even have other accounting firms using it for their clients for free.

Watch the short instructional video to see how easy it is to use.

http://www.climaxbusiness.com.au

Click on the button on the left that says "Free Business Valuation Calculator".

If anyone has any specific business valuation questions just reply to this post or start a new thread so we can share the advice with everyone.

Trevor Monaghan
Chartered Accountant
Climax Business Strategies
http://www.climaxbusiness.com.au

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The Following User Says Thank You to Trevor Monaghan For This Useful Post:
jetbookkeeping (10-07-11)
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Old 10-07-11
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Default Re: Free Business Valuation Calculator

Thanks Trevor, great tool.
Alexander

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Old 10-07-11
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Default Re: Free Business Valuation Calculator

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Originally Posted by jetbookkeeping View Post
Thanks Trevor, great tool.
Alexander
Hi Alexander,

Thanks for the feedback. Feel free to use the calculator with your clients and pass on the link to other bookkeepers or accountants. It's there to be used!

Trevor Monaghan
Chartered Accountant
Climax Business Strategies

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Old 11-07-11
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Default Re: Free Business Valuation Calculator

Hi Trevor,

Thanks for your post - useful tool!

My only question/comment by way of feedback is that there doesn't seem to be any allowance or disclaimer for intangible assets, other than reference to goodwill. A business could obviously hold an intangible asset (i.e. patent/trademark) without necessarily having much goodwill at the time of valuation. I have zero idea how that would (if it even could) be built in, but wonder if there should at least be a mention further to the 'goodwill' reference as a clear indicator of things that could alter the outcome?

Just a thought

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Old 11-07-11
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Default Re: Free Business Valuation Calculator

Hi Jacqui,

Great question. There are two general types of valuations: financial and strategic. The first is based on valuing the business on historical and projected returns to owners/investors and the second is based on the business being bought by an investor for strategic reasons. It's almost impossible to do a valuation for the latter unless you know exactly the person that will be buying the business and can quantify the additional benefits of them owning the strategic assets.

The free business valuation calculator only takes into account intellectual property to the extent that it is already being used to generate profits. In the case where the intellectual property is not yet in use then you would need to add the value of that asset if it is being sold with the business. Just like you would if there were surplus land assets.

In theory a formal valuation will try to estimate the future profits which will be generated by the intellectual property and factor the uplifted profits into the valuation. When you see internet companies selling for billions of dollars without any current profits, it is the future profits from the intellectual property they are buying, not the intellectual property itself. It all comes back to the projected profits from the current assets.

Remember that a valuer is only trying to calculate a fair price based on the projected return to owners/investors for a given level of risks. That is a baseline for negotiation where they can be comfortable that if they sell for a higher value they got a positive outcome.

What a great discussion. Feel free to post another response here if you want to keep sharing our ideas.

Trevor Monaghan
Chartered Accountant
Climax Business Strategies
http://www.climaxbusiness.com.au

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Default Re: Free Business Valuation Calculator

Trevor,

A very good and usefull tool indeed.
Can you clarify - is it the turnover figures or the revenue figures (i.e. comissions only) one should be using in the calculations ?
In the travel industry it can be a 3 mil business but the commissions is probably only 300 k .

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Old 11-07-11
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Default Re: Free Business Valuation Calculator

Hi Trevor

Thanks for your considered response!

Our office is in the business of intellectual property consultation and registration etc, and currently (coincidentally) are seeking to establish relationships with firms in each state for the purpose of referring clients to have their businesses and intellectual property/good will valued.

To give a bit further info to help determine if this is something you might be able to assist in;

We have a client specifically, who provides services in connection with creating/implementing exit strategies for business owners - with their sound belief that any one in business should have a 'plan' for exiting from that business; a part of the service she would like to provide is brief advice/comment on the value of registering IP as a part of a sound future exit plan, but is looking to be able to extend on that and be able to confirm a more precise monetary value; for example if she is helping a client with their exist strategy who holds 2 trademarks and has been in business for 10 years, how much are those 2 trademarks worth as assets?

If you can offer any comment/information to the above, please do and I will certainly pop you on my list of contacts for the above purposes as clients needs arise.

Cheers,

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Old 11-07-11
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Default Re: Free Business Valuation Calculator

Quote:
Originally Posted by travelmaster View Post
Trevor,

A very good and usefull tool indeed.
Can you clarify - is it the turnover figures or the revenue figures (i.e. comissions only) one should be using in the calculations ?
In the travel industry it can be a 3 mil business but the commissions is probably only 300 k .
Hi Travelmaster,

Either way will be fine for the free business valuation calculator to work. But if you go with the $3m make sure you put $2.7m in the cost of goods sold. As long as the gross profit is $300k the calculator will work. It values your business on profits, not turnover.

I hope this helps!

Trevor Monaghan
Chartered Accountant
Climax Business Strategies
http://www.climaxbusiness.com.au

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Old 11-07-11
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Default Re: Free Business Valuation Calculator

Quote:
Originally Posted by JacquiPryor View Post

We have a client specifically, who provides services in connection with creating/implementing exit strategies for business owners - with their sound belief that any one in business should have a 'plan' for exiting from that business; a part of the service she would like to provide is brief advice/comment on the value of registering IP as a part of a sound future exit plan, but is looking to be able to extend on that and be able to confirm a more precise monetary value; for example if she is helping a client with their exist strategy who holds 2 trademarks and has been in business for 10 years, how much are those 2 trademarks worth as assets?
Great question. "Worth to whom" is the real question here and what will they do with them if they buy the trademarks. Trademarks are just like any other assets in that they need a willing but not anxious buyer to need the asset to generate income or to help leverage other assets to generate more income. Domain names are a good example. I could say own the domain name zxrtsda.com that cost me $10 to register 10 years ago, and I could own Mercedes.com which also cost me $10 to register 10 years ago. The fact that they are intellectual property rights that have existed for 10 years is irrelevant, what is relevant is to find someone that needs that intellectual property to generate income. Obviously mercedes.com would be worth more in this case out of those two domains. But worth how much depends on the person buying it.

An internet marketer might calculate that he can place advertising on the page and generate $100,000 profit, He might pay say $500,000 for the domain. But Mercedes might want the domain as part of their overall brand protection and pay $1m. On the other hand BMW might get in quick and offer $5m so they can attack the Mercedes brand.

As you can see, you cannot put a strategic value on intellectual property without knowing exactly who the buyer is and what they need it for. The best we can do is to do some research and make some educated assumptions.

We can however calculate the value in use to the current owner by undertaking a business valuation based on current and projected profitability then subtracting the value of the tangible assets to leave a residual of goodwill and intellectual property. This is the way I would usually begin the calculation of intellectual property and then add a premium if we believed there is a buyer out there that could generate more profit from the intellectual property than we currently can for some reason.

I could go on for hours about the concepts but I think you get the picture. Anyone that starts quoting 'rule of thumb' benchmarks to value businesses or intangible assets is being lazy and doesn't understand how it all fits togther. There is no such thing as a precise monetary value of a trademark in isolation.

I guess the unfortunate upside is that many people buy businesses through brokers without getting proper valuations and take the listing price as given and try to negotiate down as you would with a house, but this obviously makes no sense. To me it's a bit like stock traders that use chart movements to buy and sell shares, it makes no logical sense, but if many others are doing it you can predict what the sheep will do and pre-empt their moves.

I'm happy to be put in touch with you and your client if you want to discuss how to approach the whole question of valuing intellectual property for exit planning purposes.

Trevor Monaghan
Chartered Accountant
Climax Business Strategies
http://www.climaxbusiness.com.au

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Old 12-07-11
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Default Re: Free Business Valuation Calculator

Hi Trevor, thanks for your post & reply!

Bottom line - not worth much if no-one wants to buy it! Makes perfect sense - expressing this to our clients at times is a little challenging; understandably, people's 'brands' and trademarks are often treated by them as though they are their children, which means in their eyes they are priceless - trying to explain that 'we understand that, but, it doesn't necessarily carry through this way to the marketplace' is difficult!

In any event, thanks again - I love the example used with Mercedes etc, think using examples like this could help to better explain to others. I have noted your details and will certainly be in touch should the need arise.

Best,

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