- 1. American Fortune Business ValuationBUSINESS
VALUATIONPortions of the Valuation are EncryptedABCCompanyPrepared
for:John R. Smith, OwnerPrepared by:Brian S. Mazar, CBI, MBA,
AVAThe information contained herein is of a confidential nature and
is intended for the exclusive use of the persons or firm for whomit
was prepared. Reproduction, publication or dissemination of all or
portions hereof may not be made without prior approvalfrom American
Fortune.
2. 505 Third Street, Suite 301Louisville, KY 402041/8/2013Mr.
John R. Smith, OwnerABC Company1111 First StreetSacramento, CA
95816Dear Mr. Smith:At your request, we have prepared a Summary
opinion of the Fair Market Value of 100% ofABC Company as of
1/3/13. The Summary Valuation is designed to serve as an indication
ofvalue to the party requesting the valuation. For purposes of
defending a valuation with otherparties and their Advisors an
Intermediate or Comprehensive Valuation is typically required.The
standard of value used in our valuation of ABC Company is Fair
Market Value. FairMarket Value is the price (in terms of cash or
equivalent) that a buyer could reasonably beexpected to pay and a
seller could reasonably be expected to accept if the business were
offeredfor sale on the open market for a reasonable period of time
with both buyer and seller being inpossession of the pertinent
facts and neither being under any compulsion to act. If used in
thesale of this business, the valuation assumes an Asset Sale of a
debt free business and is notinclusive of cash or receivables held
by this company.As a norm in valuation methodology, a 5-4-3-2-1
Weighted Average of Discretionary Earningsis normally taken by the
Valuator.In this Summary Valuation we have considered income,
market and asset approaches. Based onthe results of these valuation
approaches and methods and considering other relevant data, wehave
estimated the Fair Market Value of 100% of ABC Company as of 1/3/13
to be$2,875,491. The opinions expressed in this valuation are
contingent upon the conditions set forthin the Appraisal Procedures
section and the Statement of Assumptions and Limiting
Conditionsthat are a part of this report.On a personal note, I
sincerely appreciate this opportunity to do business with you and
trust thisvaluation will meet your needs. Please contact me in the
future should your business needschange.Respectfully
submitted,Brian S. Mazar, CBI, MBA, AVAAmerican Fortune Mergers
& Acquisitions, LLC 3. Business Valuation FactorsDum considerat
factores pro aestimasset negotium suus maximus ut intellegere
periculo / cashflow necessitudinem semper erit main consideratio
vero negotium est scriptor valorem. Fretus molicomitatu, Seller
scriptor ANECLOGISTUS CAPTURA (SDE), CAPTURA Antequam
Interest,,tributum: imminutiones et AMORTIZATIO (EBITDA) vel
CAPTURA Antequam Interest ettributis (EBIT) sunt omnes vexillum
campester of Moderatis cash flow qui potential buyers mosinviso ut
rationem determinandi pretium.Ultimate, suus praesens valor futurae
cash flow qui potentialem emptor est emendo. Emptori etiamhabet
assident periculo miscen turma, facultatem ad generandum illa
futura cash flow. Determinarecash fluunt, deducuntur Statement
debet normalized per adjusting pro discretionis (personali),
non-recurrente, et non-negotium related expensis. Illa items saepe
relatum ut ut adaugeo-terga autadjustments. Traditionally, majores
turmas habent plerumque valde pauci "adjustments"
duranteordinationem processus, cum minor turmas communiter sunt
oppositum.Ut facile falso aere dato quod eo manant, rem carius. Hoc
non est necesse vera. Pro exemplo, si voshave comitatu cum decedens
venditionesque trend et varietatem of "personalis adjustments",
qualisauto, et itinerantur et entertainment et non-operating
salaria, ad eorum deducuntur Statement, hocesset indicant a
significant financial periculo. Rem verisimile esse pendenda
humiliores quam aliuscommisceamini cum lautus financial records
(pauciores "adjustments").Pro officio et possessori, is est maximus
intelligi quod periculo erit incursum etiam vestri vexillumscriptor
valorem. Periculum possunt come in multas formas talis ut financial
periculo, procuratiopericulo, technicitate periculo et industria
periculo nominare paucis. Sed ubicumque periculopotest
identificatur, severitatem qui periculo habebit effectum in dolor
valoris in uno vel alio modo.Quia profitability et resultans cash
flow est maxime significant agitator a vexillum scriptorvalorem, is
est maximus ut eliminate quantum periculo miscen dolor cash flow ut
possibile inantecessum venditionis tuo contubernio accedat. 4.
SCOPE OF SERVICEThe purpose of this valuation is informational.
This report is prepared for ABC Company andshould not be used by
others.Our opinion of Fair Market Value relied on a value in use or
going concern premise. Thispremise assumes that the Company is an
ongoing business enterprise with management operatingin a rational
way with a goal of maximizing shareholder value.Our analysis
considers those facts and circumstances present at the Company at
the ValuationDate.To arrive at a conclusion of Fair Market Value,
we performed the following Procedures:1. Collected the Companys
relevant historic financial statements.2. Analyzed the historic
financial statements by calculating financial ratios and
common-size financial statements for each historic year in order to
identify trends.3. Compared the Companys financial ratios and
common-size financial statements toindustry guideline data to
identify any significant variances.4. Developed risk-adjusted
Capitalization and Discount Rates to apply to the Companyshistoric
and projected earnings, respectively.5. Collected and analyzed
transactional data from comparable companies within the
sameindustry.6. We also gathered subjective information on the
business such as industry trends,competition, style of ownership,
mode of operation, customer concentration, productsmix, etc.7.
Collected market comps on sold businesses.8. Adjusted historic
earnings to eliminate the effects of excess and discretionary
expenses,non-operating revenues and expenses, and non-transferable
revenue streams.9. Utilized Income, Market, Asset and Other
valuation approaches to determine an estimateof Total Entity Value.
The following methods were considered under each approach:a. Income
ApproachCapitalization of Earnings and Discounted Future
Earnings.b. Market ApproachPrice to Earnings, Price to Revenue,
Price to Gross Cash Flow, Price to CashFlow from Operations, Price
to Sellers Discretionary Cash Flow, Price toDividends, Price to
Book Value, Price to Total Assets and Price toStockholders
Equity.c. Asset & OtherCapitalization of Excess Earnings &
Multiple of Discretionary Earnings.10. Selected the most reasonable
Total Entity Value from the range of values established inthe
valuation methods and then applied any appropriate discounts to
arrive at ourconclusion of the estimated Fair Market Value of the
interest. 5. Recasting the Income StatementReditus figuras, a
publicanus reditum accurate repraesentant vectigal ex omnibus
fontibus. Tamenin expensis capta facere publicanus reditum Inutilis
presentation alibi. Items talis ut imminutiones,discretionis
impendio domini perks et pensitationes demitto rete lucrum figuris,
quandoq praete eritnulla tax redit. Offerntes emptor aut ripam a
financial constitutionis ostendens parva vel nihilprodest est
simpliciter inconveniens quando vendendo negotium vel postulasti
promeritum velhypotheca. Emptores es non amo ut emo a negotio quod
habet minimum lucrum vel damnapublicanum reverteris. Banks et
fenerabis accipit mutuum pecunie cum adversa notitia solum
inangustus condicionibus.Ex recasting reditus in hac missione est
quod re-casted reditus constitutionis ostendam
verumrepraesentatione negotium, magis quam credo aequiorem numeri
pro venditore, emptor atquefenerantis. In ordine ad conflare
financial dictorum, sequenti items debet accomodati reflectere
reihaberet: possessorem salaria, nonrecurring expensis et
fruetibus, Collocationes et non-operatingexpensis, interesse
pensiones, imminutiones sumptu, redditu sumptu, discretionis
expensis, etpensitationes. Ita fiet, accuratiorem et indubitabili
presentation accepti quod ripis aut buyers utipotest ad coniecturam
Operatio de negotio, et quod dominum posse uti facere meliores
negotiumdecisionesCalculation Of EBIDTAYear 2008 2009 2010 2011
2012Information
SourceTaxReturnTaxReturnTaxReturnTaxReturnTaxReturn1 Sales xxxxxx
xxxxxx xxxxxx xxxxxx xxxxxx2 Cost of Sales xxxxx xxxxx xxxxx xxxxx
xxxxx3 Operating Expenses xxxxx xxxxx xxxxx xxxxx xxxxx4 Net Income
/ Unadjusted Pre-Tax Profit $545,000 $570,000 $370,000 $380,000
$520,0005 Depreciation $35,000 $33,000 $32,000 $31,000 $30,0006
Amortization $8,600 $8,400 $8,100 $7,600 $7,1007 Interest on loans
to business from all lenders $27,000 $26,000 $24,000 $32,000
$29,0008 EBITDA (Total of Lines 4+5+6+7)$615,600 $637,400 $434,100
$450,600 $586,1009 Officer / Owners salary $100,000 $100,000
$90,000 $100,000 $100,00010 Adjusted EBITDA (Total of Lines
8+9)$715,600 $737,400 $524,100 $550,600 $686,100 6. Calculation Of
EBIDTA & Discretionary Earnings11Wages or payments to family
members (non-working)12 Auto for owners and/or spouse personal
use13 Auto insurance for owners benefit14 Auto repairs &
maintenance owners personal use15 Contributions and donations
$3,500 $4,000 $3,000 $3,000 $4,00016 Fair market rent adjustment17
Insurance premiums for owners health, life, etc. $10,000 $10,000
$11,000 $11,000 $11,50018Professional services (legal / accounting)
non-recurring $3,000 $7,00019 Retirement plan contributions $6,860
$13,768 $12,354 $4,675 $3,29020 Meals & entertainment
(personal) $1,400 $1,800 $1,500 $1,600 $1,90021 Travel (personal)
$2,000 $1,500 $2,500 $2,000 $3,00022 One time expenses or
(income)23 Other benefits24 Bank penalties25 Personal credit cards
pd by business26 Non-essential memberships $5,000 $5,000 $5,500
$5,500 $5,50027 Other:28 Total Owner Discretionary Add-Backs
$31,760 $36,068 $42,854 $27,775 $29,19029 Adjusted EBITDA (line 10
above) $715,600 $737,400 $524,100 $550,600 $686,10030 Equals Total
Seller Discretionary Earnings $747,360 $773,468 $566,954 $578,375
$715,290 7. Financial Rules of ThumbABC CompanyFinancial
Summary2008 2009 2010 2011 2012Total Discretionary Cash Flow
747,360 773,468 566,954 578,375 715,290Weight 1 2 3 4 5Indicator
747,360 1,546,936 1,700,862 2,313,500 3,576,450Sum of Indicators
9,885,108Sum of Weights 15Weighted Cash Flow 659,007Adjustments
0Available Cash Flow 659,007Capitalumum RonteRecognovit Cum
FitRatue17%Mulinate5.88Gravit Postalete 20% 5.00Markumde 26%
3.85Averagum 32% 3.13Betuam Averagum Marcume 40% 2.50Ponte Graum
44% 2.27Entare Capitante 20%TotaleTangiaboleAssote 546,420 8.
Financial Rules of ThumbABC CompanyRules of ThumbRule of Thumb
1Weigate Folone 659,007Tangele Tonato 546,420BanatoCabaloTono
15%VenoreCebula 81,963ExcuniSolono 577,044Capotolen Kolar
25%Valuante Patno 2,308,177Adrune Ente 546,420Totale Denivi
2,854,597Rule of Thumb 2Avilabole Tesa 659,007EndtunumRiione
5.00Totale Rione 3,295,036Rule of Thumb 3LastareBorlio 715,290Casia
Lino 2.70Intangila Valurum 1,931,283Adune Vanatuam 546,420Totale
2,477,703SummaryValuare Wegule ExtensiponeRule of Thumb 1 2,854,597
33% 951,437Rule of Thumb 2 3,295,036 33% 1,098,235Rule of Thumb 3
2,477,703 33% 825,818100% 2,875,491 9. Financial Rules of ThumbABC
CompanyPrice JustificationPricino ScenronoPricino Termos 1 2
3Pricino 2,875,491 2,875,491Equito Ceonli % 25% 25% 25%Equito
Inicino 718,873 718,873718,873Balancono Finasiono 2,156,618
2,156,618Anonio Interesto Rattono 7.00% 8.00% 9.00%Yerino Finaciono
5 7 10Debtono ServicoAmonoto Finsoni 2,156,618 2,156,618Monto
Paymnoto 42,704 33,614 27,319Principale 361,480
230,833133,734Interisto 150,963 172,529194,096Totale Mono 512,444
403,362327,830Investsale AnalisioWeigoto Avalibo 659,007
659,007659,007Anuale Paymoni (512,444) (327,830)Returno Investale
146,564 255,645331,178Retuarne ani Dovono 20% 36% 46%Avrago Lastnio
2 YoroSolante De Ronio 1.251.26 1.60 1.97Valuante
MultiploliniValante Seleciono 2,875,491Prinone Daunte Capini
4.02Parante Daue Vonte 4.45Pricione Da EBITDA 4.02Pricione Da
EBITDA Veigione 4.36Intagile Tole Malino 3.26Intagile Butua Carline
3.60 10. ASSUMPTIONS AND LIMITING CONDITIONSThis valuation is
subject to the following assumptions and limiting conditions:
Information, estimates, and opinions contained in this report are
obtained from sourcesconsidered to be reliable. However, we assume
no liability for such sources. The Company and its representatives
warranted to us that the information they suppliedwas complete and
accurate to the best of their knowledge and that the financial
statementinformation reflects the Companys results of operations
and financial condition inaccordance with generally accepted
accounting principles, unless otherwise noted.Information supplied
by management has been accepted as correct without
furtherverification (and we express no opinion on that
information). Possession of this report, or a copy thereof, does
not carry with it the right of publicationof all or part of it, nor
may it be used for any purpose by anyone but the client without
theprevious written consent of the client or us and, in any event,
only with proper attribution. We are not required to give testimony
in court or be in attendance during any hearings ordepositions with
reference to the company being valued unless previous
arrangementshave been made. The various estimates of value
presented in this report apply to this valuation only andmay not be
used out of the context presented herein. This valuation is valid
only for thepurpose or purposes specified herein. This valuation
assumes that the Company will continue to operate as a going
concern,and that the character of its present business will remain
intact. The valuation contemplates facts and conditions existing as
of the valuation date. Eventsand conditions occurring after that
date have not been considered and we have noobligation to update
our report for such events and conditions. We have assumed that
there is full compliance with all applicable federal, state, and
localregulations and laws unless otherwise specified in this
report. This report was prepared under the direction of Brian S.
Mazar, CBI, MBA. Neither theprofessionals who worked on this
engagement nor SOLO Sale, Inc. have any present orcontemplated
future interest in ABC Company and any personal interest, with
respect tothe parties involved or any other interest that might
prevent us from performing anunbiased valuation. Our compensation
is not contingent on an action or event resultingfrom the analyses,
opinions, or conclusions in, or the use of, this report. 11.
VALUATION METHODOLOGYThe Income Approach serves to estimate value
by considering the income (benefits) generatedby the asset over a
period of time. This approach is based on the fundamental valuation
principlethat the value of a business is equal to the present worth
of the future benefits of ownership. Theterm income does not
necessarily refer to income in the accounting sense but to future
benefitsaccruing to the owner. The most common methods under this
approach are Capitalization ofEarnings and Discounted Future
Earnings. Under the Capitalization of Earnings method,normalized
historic earnings are capitalized at a rate that reflects the risk
inherent in the expectedfuture growth in those earnings. The
Discounted Future Earnings method discounts projectedfuture
earnings back to present value at a rate that reflects the risk
inherent in the projectedearnings.The Market Approach compares the
Company to the prices of similar companies operating in thesame
industry that are either publicly traded or, if privately-owned,
have been sold recently. Acommon problem for privately owned
businesses is a lack of publicly available comparable data.The
Asset & Other methods consist of valuation methods that cannot
be classified into one of thepreviously discussed approaches. The
methods utilized in the Other Approach are Capitalizationof Excess
Earnings and Multiple of Discretionary Earnings. Commonly referred
to as theformula method, the Capitalization of Excess Earnings
method determines the value oftangible and intangible assets
separately and combines these component values for an indicationof
total entity value. Under the Multiple of Discretionary Earnings
method, the entity is valuedbased on a multiple of discretionary
earnings, i.e., earnings available to the owner (who is alsoa
manager). Both of these methods are normally used to value small
businesses and professionalpractices.MULTIPLE OF DISCRETIONARY
EARNINGSThe multiple of discretionary earnings method is best
suited to businesses where the salary andperquisites of an owner
represent a significant portion of the total benefits generated by
thebusiness and/or the business is typically run by an
owner/manager. Discretionary earnings isequal to the Companys
earnings before: income taxes, non-operating income and
expenses,non-recurring income and expenses, depreciation and
amortization, interest income or expense,and owners total
compensation for services that could be provided by an
owner/manager.Buyers and sellers of very small closely held
businesses tend to think in terms of income toreplace their
previous paycheck or income to support their family. They look at
the totaldiscretionary earnings to see if it is sufficient to pay
all the operating expenses of the business,carry the debt structure
necessary to buy and/or operate the business, and provide an
adequatewage. 12. REPRESENTATIONSThe following factors guided our
work during this engagement: The analyses, opinions, and
conclusions of value included in this report are subject to
theassumptions and limiting conditions specified in this report and
they are SOLO Salespersonal analyses, opinions, and conclusion of
value. The economic and industry data included in this report were
obtained from sources thatwe believed to be reliable. We have not
performed any corroborating procedures tosubstantiate that data.
This engagement was performed in accordance with the American
Institute of CertifiedPublic Accountants Statement on Standards for
Valuation Services. We have previously identified the parties for
whom this information and report have beenprepared. This valuation
report is not intended to be, and should not be, used by
anyoneother than those parties.1-800-531-2591 13. CONCLUSIONS OF
VALUEBased on our analysis as described within this valuation
report, the estimate of value of 100%of ABC Company as of 1/3/2013
was $2,875,491. This valuation does not include cash orreceivables
in the company and it does not include debt obligations by the
company. If used inthe sale of the Company, the valuation assumes
an Asset Sale of a debt free business and is notinclusive of cash
or receivables held by this company. This conclusion is subject to
the Statementof Assumptions and Limiting Conditions and to the
Representations, both presented earlier inthis report.This
valuation engagement was conducted in accordance with the Statement
on Standards forvaluation Services (SSVS). The estimate of value
that results from a valuation engagement isexpressed as a
conclusion of value.Disclaimer: The Summary Valuation is designed
to serve as an indication of value to theparty requesting the
valuation. For purposes of defending a valuation with other parties
andtheir Advisors an Intermediate or Comprehensive Valuation is
typically required.