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Excel Skills | Business Valuation Template Excel Skills | Business Valuation Template About this template About
Excel Skills | Business Valuation Template
Excel Skills | Business Valuation Template
About this template
About this template
This template enables business owners and buyers or sellers of businesses to compile an inf
This template enables business owners and buyers or sellers of businesses to compile an in
projections that are automatically compiled from the template assumptions. The net annual cas
projections that are automatically compiled from the template assumptions. The net annual cas
capital (WACC) in order to calculate a net present value (NPV), internal rate of return (IRR) an
capital (WACC) in order to calculate a net present value (NPV), internal rate of return (IRR) an
of the template also enables users to perform sensitivities on the projected cash flow and fina
of the template also enables users to perform sensitivities on the projected cash flow and fina
business is worth. All valuation calculations are based on both a three year and a five year per
business is worth. All valuation calculations are based on both a three year and a five year pe
businesses but can also be used to calculate a business valuation for service based businesse
businesses but can also be used to calculate a business valuation for service based business
in the template assumptions.
in the template assumptions.
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This Excel document is only a sample of the business valuation template. We’ve created thi
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features of this template. You will therefore not be able to use this version of the template - th
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Excel Skills | Business Valuation Template Excel Skills | Business Valuation Template About this template About

ormal valuation of a business based on the cash flow

formal valuation of a business based on the cash flow

h flows are discounted at the weighted average cost of

h flows are discounted at the weighted average cost of
d

an estimated business valuation. The flexible design

d an estimated business valuation. The flexible design

ncing of a business in order to evaluate how much the

ncing of a business in order to evaluate how much the

iod. This template is the ideal solution for trade based

riod. This template is the ideal solution for trade based

s by simply specifying a 100% gross profit percentage

s by simply specifying a 100% gross profit percentage

s than regular Excel templates. Most Excel templates

ns than regular Excel templates. Most Excel templates

  • d on limited user input. You also don't need advanced

on limited user input. You also don't need advanced

lude comprehensive step by step instructions.

clude comprehensive step by step instructions.

s sample to enable customers to view the layout and

s sample to enable customers to view the layout and

e full version of the template can only be downloaded

e full version of the template can only be downloaded

ormal valuation of a business based on the cash flow formal valuation of a business based
Register for a full membership click here
Register for a full membership
click here

Excel Skills | Business Valuation Template

Instructions

This template enables business owners and buyers or sellers of businesses to compile an informal valuation of a busin

based on the cash flow projections that are automatically compiled from the template assumptions. The net annual c

flows are discounted at the weighted average cost of capital (WACC) in order to calculate a net present value (NPV), inte

rate of return (IRR) and an estimated business valuation. The flexible design of the template also enables users to perf

sensitivities on the projected cash flow and financing of a business in order to evaluate how much the business is worth

valuation calculations are based on both a three year and a five year period.

Note: A formal valuation of a business usually involves a comprehensive analysis of the cash flow that is generated by

business and the inherent risk factors that may affect a business valuation. We therefore believe that it is impossible

compile a formal, independent business valuation by using any stand alone business valuation tool and the results that

produced by this template should therefore not be interpreted as a formal business valuation. This template is howeve

unique business valuation solution that adds immeasurable value in determining and analyzing the estimated value o

business on a discounted cash flow basis.

The following sheets are included in this template:

Assumptions - this sheet contains all the user assumptions that are required in order to compile the business valua

calculations in this template. Most of the assumptions are used in compiling the five year forecast of annual cash flows,

some important financing assumptions are also included at the bottom of the sheet.

CashFlow - the 5 year annual cash flow forecast on this sheet is automatically compiled from the assumptions that

entered on the Assumptions sheet. The only user input that is required on this sheet is the addition of expense items if the

default expenses are not sufficient.

Valuation - the annual cash flow projections and the financing assumptions that are entered at the bottom of

Assumptions sheet are used in the calculation of the weighted average cost of capital (WACC), net present value (NP

internal rate of return (IRR) and estimated business valuation on this sheet. We have also included a calculation of

annual cash flow after debt repayment in order to provide an indication of the estimated net disposable income that

business can be expected to generate.

Assumptions

Turnover

The turnover amounts that are included in the annual cash flow forecast are calculated from the year 1 amount tha

entered in cell C6 on the Assumptions sheet and increased for subsequent years by applying the appropriate ann

increase percentages that are specified in row 7 on the Assumptions sheet to the appropriate previous year's turno

amount.

Gross Profit %

The estimated gross profit percentages that are entered in row 9 on the Assumptions sheet are used to calculate

appropriate gross profit amounts in each year on the cash flow forecast. The cost of sales amounts are then calculated

deducting the gross profit amounts from the appropriate turnover amounts.

Note: Gross profit percentages of 100% can be entered in row 9 in order to compile a cash flow forecast for service ba

businesses. The turnover amounts will then be the same as the gross profit amounts and you can hide the cost of sales

gross profit rows on the CashFlow sheet if you don't want to include these calculations on the annual cash flow projection

Expenses

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Excel Skills | Business Valuation Template

Instructions

The template includes 23 default expense items that can be customized based on requirements. The default expense it

descriptions can be edited in order to change the appropriate expense items and you can sort the expense item descripti

on the Assumptions sheet in alphabetical order after customizing the default list. The expense item descriptions and amou

on the cash flow forecast are automatically updated.

You can also add additional expense items to the default list by simply inserting a row anywhere above the "Add n

expense items above this row" text in row 34. The expense items that are added above this row are automatically upda

on the CashFlow sheet but you also need to insert the appropriate number of additional rows on this sheet in order to incl

all the expenses that are listed on the Assumptions sheet on the cash flow forecast.

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Excel Skills | Business Valuation Template

Instructions

The year 1 expense amounts in column C on the Assumptions sheet are automatically included in the appropriate rows

the CashFlow sheet. The year 2 to year 5 expense amounts are calculated by applying the expense increase percenta

that are entered in row 35 to the appropriate expense amounts of the previous year.

Individual expense items are not covered in these instructions because the nature of expenses differs based on the natur

the business that the cash flow forecast is compiled for. We would however like to emphasize that users need to ensure t

all expenses are included in the cash flow forecast because the omission of material expenses could result in an inaccur

business valuation being calculated.

Some expense items do however require special mention for the purpose of this template. If you are calculating a busin

valuation for a start-up business, some costs may be incurred in the first year but not in subsequent years. These start

costs should be included in the list of expense items on the Assumptions sheet but the formulas that are used in orde

calculate the expenses for subsequent years on the CashFlow sheet should be deleted and replaced by nil values.

The Salaries & Wages expense for owner managed businesses should also be carefully considered. For business valua

purposes, it is important that the amounts that are included in expenses are market related given the role that the ow

intends to fulfil in the business. The salary that the owner wishes to earn from the business should not form part of

expense line item because it will distort the business valuation that is calculated.

Instead, the annual cash flow after debt repayment (estimated annual net disposable income) should be added to

owner's market related salary in order to determine the projected gross earnings (before income tax) that the owner would

able to earn from the business. The annual cash flows after debt repayment are calculated in row 26 to 28 on the Valua

sheet.

Note: Non-cash expense items like depreciation on property, plant & equipment should not be included in the cash f

projections quite simply because these items are accounting entries and not related to the cash that is generated b

business.

Working Capital

The working capital of a business consists of inventory, debtors and creditors balances. The movements in these balan

form part of the operating cash flow of a business and are therefore included in the calculation of our annual cash f

projections. In order to calculate the movements in working capital, users therefore need to enter the estimated start

balances (for existing businesses) and annual closing balances for each of the working capital account groups (invent

debtors and creditors). Note that the estimated closing creditor balances need to be entered as negative values.

When this template is used to calculate an estimated business valuation for an existing business or a business tha

acquired as a going concern, the start-up working capital balances should be easy to determine (based on the busin

accounts or acquisition agreement). If the template is however used to calculate a valuation for a business with no previ

trading history, the start-up balances should be nil and the closing working capital balances for each projection year sho

be estimated.

We recommend applying an estimated "days" factor to the appropriate income statement items in order to calculate

accurate estimate of the appropriate working capital closing balances. For example, the closing inventory balance for e

year can be calculated by dividing the cost of sales amount of the appropriate year by 365 and multiplying the result by

estimated days of inventory that is kept on hand.

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Excel Skills | Business Valuation Template

Instructions

Similarly, debtors closing balances can be calculated by dividing the turnover amount of the appropriate year by 365

multiplying the result by the number of days' sales that is expected to be outstanding at the end of each year. Debtor trad

terms and the ratio of cash and credit sales should also be considered in determining this estimate.

The outstanding creditors balances can also be calculated based on a number of days assumption, but users should kee

mind that this balance is influenced by inventory purchases as well as expense items and the ratio of cash and cr

payments. The trading terms that are negotiated with suppliers can therefore be used in calculating the estimate but

expense line items that are paid in the same period as the expenses were incurred should also be taken into account.

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Excel Skills | Business Valuation Template

Instructions

Capital Expenditure

All the forecasted acquisitions of property, plant & equipment (fixed assets) that do not form part of the initial busin

acquisition should be entered in row 41 on the Assumptions sheet. It is also important to note that you should only incl

fixed assets with a useful life of more than one year in capital expenditure. Assets with a useful life of less than a year sho

be included in the Expenses section.

All capital expenditure amounts should be entered as positive values - the amounts are automatically converted to nega

values (cash outflows) on the CashFlow sheet. Note that it is the amounts that are forecasted to be spent in each year

should be included in the assumptions and not the closing balance of all fixed assets.

As we've mentioned before, depreciation should not be included as an expense item for the purpose of this temp

because it is not a cash expense. We do however recommend that the deterioration of the condition of fixed asset

considered when estimating the capital expenditure amounts, especially in years 4 and 5.

Acquisition Price & Financing

A business acquisition price should be entered in cell B43 on the Assumptions sheet. We recommend that an amoun

entered regardless of whether a valuation is being calculated based on a business acquisition or not. If there isn't a spe

business acquisition price, enter an estimated valuation for the business in this input cell. This value is required in orde

calculate the WACC and therefore in order to calculate a business valuation in accordance with the principles of discoun

cash flow.

Note: If you enter a nil amount as the business acquisition price, the WACC will be nil and the annual cash flows that

forecasted will be discounted by 0% in determining the value of the business. This means that the NPV and the estima

business valuation will equal the sum of the appropriate annual cash flows and will not be discounted to take the requi

return on investment into account. The IRR can also not be calculated if an initial capital outflow amount (busin

acquisition price) is not specified and will be reflected as 0%.

If the business acquisition price includes an amount for working capital, this amount should still be included in the amo

that is entered in cell B43 even though the working capital balances are also entered in the working capital section of

assumptions. The full business acquisition price needs to be evaluated in the template calculations and the working cap

start-up balances are only entered in the working capital section of the assumptions in order to calculate the working cap

movements in year 1.

If the valuation is calculated for a business that is being acquired as a going concern and the new business will be registe

for sales tax purposes, the sales tax amount that is included in the business acquisition price should be deducted from

full acquisition price. This amount will be claimed back from the appropriate tax authorities and the business acquisition p

should therefore be exclusive of sales tax under these circumstances.

The next four input cells relate to the financing of the business and play an important role in the calculation of the WA

The loan amount (amount of debt financing) should be entered in cell B44 on the Assumptions sheet. This amount is a

used in order to calculate the amount of equity that will be required in order to finance the business acquisition. The eq

contribution is simply the difference between the business acquisition price and the amount that is financed by debt (l

amount).

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Excel Skills | Business Valuation Template

Instructions

Note: For businesses that are being acquired, the loan amount should be the amount of debt financing that will be use

finance the business acquisition. For start-up businesses, the loan amount should equal the amount of financing that will

available in order to finance the initial business activities. For existing businesses, the loan amount can either be

outstanding amount on existing loan facilities or can be calculated by using the business's existing debt / equity ratio.

Note: The loan amount must be less than or equal to the business acquisition price and the business acquisition price m

therefore obviously be greater than or equal to the loan amount. If you therefore want to edit the values in these input c

by entering a business acquisition price that is less than the current loan amount input cell value, you have to edit the l

amount input cell first otherwise the value that you enter will not be accepted.

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Excel Skills | Business Valuation Template

Instructions

The cost of debt that is entered in cell B45 should be the annual interest rate associated with the debt facility to which

loan amount in cell B44 relates. This value should therefore be entered as a percentage. The repayment period tha

entered in cell B46 should be the remaining loan repayment period. This input cell is only used in the calculation of the

cash flow after debt repayment on the Valuation sheet and a minimum value of 1 should be entered in this cell in orde

calculate the appropriate annual debt repayment amounts.

The required return on equity should be entered in cell B47. The value that is entered in this input cell is a subjective va

that depends on the annual return that the shareholders who contribute the equity funds to the business require from t

investment. The required return should be entered as a percentage before taking the effect of income tax into account

other words, this should be the minimum return that the shareholders expect from the funds that they are investing in

business before income tax is deducted from the amounts that are returned to them.

Note: The income tax applicable to the returns of shareholders could be in the form of income tax on dividends if profits

returned to shareholders through the declaration of dividends or income tax on earnings in the case of an owner mana

business if profits are distributed to the owners as remuneration (salaries & wages).

Note: A benchmark for the required return on equity is between 20% and 30%. The percentage that is specified in this in

cell influences the WACC and therefore has a direct impact on the business valuation that is calculated. As we mentio

before, this is a subjective input variable and we therefore recommend that users test the effect that different return on eq

percentages have on the business valuation that is calculated.

Annual Cash Flow

The annual cash flow projections on the CashFlow sheet are automatically compiled from the input values that are ente

on the Assumptions sheet. The calculation of the line items that are included on the cash flow projections is covered un

the Assumptions section of these instructions. The only user input that is required on the CashFlow sheet is the additio

expense items (if additional expenses have been added to the Assumptions sheet).

If additional expense items have been added on the Assumptions sheet, you may notice that not all the expense items

included in the cash flow projections. The additional expenses have to be added to the cash flow projections by inserting

appropriate number of additional rows anywhere between the existing expense rows and copying the formulas in column

G from one of the existing rows. Note that the descriptions of the expense items below the empty rows will change a

inserting the new rows but all the appropriate descriptions are included after copying the formulas.

The order in which expense items are displayed on the CashFlow sheet is exactly the same as the order in which expe

items are included on the Assumptions sheet. If you therefore delete some of the expenses from the list on the Assumpti

sheet, the row below the last expense item on the CashFlow sheet will contain the "Add new expense items above this r

text. You therefore need to delete this row and all the other rows below it in the Expenses section so that only valid expe

items are included on the cash flow projections.

Note: We recommend that you review the completeness of expense items on the cash flow projections by ensuring that

last expense item on the Assumptions sheet is included on the CashFlow sheet.

Note: The cash outflow relating to the repayment of loans is not included on the cash flow forecast because it is include

the calculation of the weighted average cost of capital (WACC) which is used as the discount rate in calculating the NPV

estimated business valuation.

Business Valuation Calculations

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Excel Skills | Business Valuation Template

Instructions

The Valuation sheet contains all the business valuation calculations that are included in this template. All the calculations

this sheet are automatically calculated from the input values that are entered on the Assumptions sheet and the cash f

projections on the CashFlow sheet. No user input is required on the Valuation sheet.

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Excel Skills | Business Valuation Template

Instructions

All the business valuation calculations that are included in this template are calculated over both a 3 year and 5 year peri

In practice, some business brokers or advisors may indicate that a three year calculation period is the norm but we beli

that it is a lot more prudent to evaluate an investment over both a 3 year and 5 year period. If the business owner intend

sell the business after 3 years, the 3 year calculation should however carry more weight. If however the business owner

a longer investment period in mind, the calculations over the 5 year period should be considered the most important.

For example: In some scenarios, the business valuation calculations may indicate that a business does not provide

adequate return over a 3 year period but when the business is evaluated over a 5 year period, the investment significa

exceeds the investment return requirements. If a valuation calculation is only performed over a 3 year period, it

therefore result in the incorrect investment decision. If however the business owner has no intention of owning the busin

for longer than 3 years, the 5 year calculation is in effect meaningless.

Note: When you calculate a business valuation over a period as long as 5 years, you should be prudent in the assumpti

that are used in compiling annual cash flow projections. This principle is especially important in relation to the cap

expenditure that is included in the cash flow projections - it is important to recognize that the condition of fixed ass

deteriorates over time and that some assets may have to be replaced after a certain period has elapsed. Also, if your c

flow projections include a significant increase in turnover, you should ensure that you provide for the acquisition of additio

capital assets if the capacity of existing assets is insufficient in order to achieve the projected levels of turnover.

The Valuation sheet includes the following business valuation calculations:

Weighted Average Cost of Capital (WACC)

The WACC is the weighted average cost of the capital that is used to finance the business and is expressed as an ann

percentage. For the purpose of this template, the WACC calculation consists of capital in the form of equity and debt.

The debt amount that is included in the WACC calculation is the same as the loan amount that is entered in cell B44 on

Assumptions sheet. The equity amount that is included in the WACC calculation is calculated by deducting the debt amo

from the business acquisition price that is entered in cell B43 on the Assumptions sheet. In order to calculate the WACC

the business, we need to calculate the percentage of the business acquisition funding that can be attributed to each sou

of financing, apply these percentages to the cost that is associated with each financing component and sum the calcula

result.

The percentage of the acquisition price that is financed by debt and equity is calculated in cells C7 and C8 and the cos

each component is included in cells D7 and D8. Note that the cost of debt and the cost of equity (or required return

equity) are specified in cells B45 and B47 on the Assumptions sheet. The WACC of the business is calculated by multiply

the percentages in cells C7 and C8 by the costs in cells D7 and D8 and adding up the resulting percentages in cells E7

E8 in order to display the WACC in cell E9.

The WACC is the minimum annual return on investment that is required in order to cover the cost of the capital that is u

to finance a business. For the purpose of a discounted cash flow calculation, the WACC is used as a discount rate in a

Present Value (NPV) calculation in order to determine whether the estimated annual return on investment from the busin

provides an adequate return for the providers of debt financing (banks or other financial institutions) and contributors

equity (owners or shareholders).

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Excel Skills | Business Valuation Template

Instructions

Note: The WACC calculation is subjective in nature because even though the cost of debt of a business is usu

determined by the costs (interest) charged by financial institutions, the required return on equity is determined by

shareholders of the business. The shareholders of one business may be satisfied with a return on equity of 20% per year,

the shareholders of another business may only be satisfied with 25% per year.

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Excel Skills | Business Valuation Template

Instructions

Note: The ratio in which debt and equity is contributed to a business could have a material impact on the business valua

that is calculated. The cost of debt is usually lower than the required return on equity. This is because of the higher leve

risk that is associated with equity investments. If a business acquisition is financed mostly out of debt, the cost of capital

WACC) and therefore also the required investment return would be lower. The WACC is used as the discount rate in

business valuation calculation and a lower discount rate will inevitably result in a higher business valuation. We there

recommend that you calculate the estimated business valuation based on a number of different debt / equity combination

order to measure the impact that the debt / equity ratio has on the calculation of the estimated business valuation.

Note: As we've mentioned before, the WACC is used as the discount rate in the business valuation calculation and

subjective nature of the required return on equity component and the subjective assumptions that are used in compiling

annual cash flow projections therefore result in a subjective calculation result. This does not mean that the busin

valuation that is calculated will not be accurate, it only means that the calculation result will only be as accurate as

assumptions that are entered and different required rate of return values will result in different valuation results. We theref

recommend that users test the business valuations that are calculated by entering different levels of return on equity (ther

measuring the sensitivity of this calculation variable).

Net Present Value (NPV)

The NPV calculation indicates whether a business provides an adequate return on investment and is calculated

discounting the annual cash flow projections by the WACC. If the NPV calculation results in a positive value, it means t

the business provides a return in excess of the required investment return (the WACC). Conversely, if the NPV valua

results in a negative value, it means that the projected investment return is less than the required investment return and

the purpose of this template that the business acquisition price may be overstated.

The value that is returned by the NPV calculation is also important because it indicates the value by which the investm

return exceeds or falls short of the required investment return. The NPV calculation can therefore be used effectivel

conjunction with the IRR calculation because the one calculation indicates the value of an excess or shortfall in investm

return (NPV) while the other calculation indicates the annual projected investment return in percentage terms (IRR).

The NPV calculation consists of three components, namely the WACC, the annual cash flow projections and the busin

acquisition price (or initial capital outlay). If changes are made to any of these components, the NPV calculation result

change. The WACC is calculated in the cell range from cells A7 to E9 on the Valuation sheet, the annual cash f

projections are compiled on the CashFlow sheet and the business acquisition price (the initial capital outlay) is entered in

B43 on the Assumptions sheet.

Internal Rate of Return (IRR)

The IRR indicates the annual return on investment and is calculated based on the business acquisition price that is ente

in cell B43 on the Assumptions sheet and the annual cash flows that are compiled on the CashFlow sheet. The calcula

result is expressed as a percentage and it is important to note that this percentage represents an annual investment ret

(as opposed to an investment return for the entire 3 or 5 year period).

If the IRR exceeds the WACC that is calculated in cell E9, it means that the projected investment return exceeds the requi

investment return. Conversely, if the IRR is less than the WACC, the projected investment return is less than the requi

investment return. An IRR which exceeds the WACC will also result in a positive NPV value and an IRR which is less t

the WACC will result in a negative NPV value.

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Excel Skills | Business Valuation Template

Instructions

Note: If you don't enter a business acquisition price in cell B43 on the Assumptions sheet, the IRR calculation may resu

an error or in an inaccurate result. An estimated business valuation should therefore be entered in this input cell if

business acquisition price has not been determined.

Note: An IRR calculation can only be performed if the initial capital outflow (the business acquisition price) and the cash f

projections include both positive and negative values. This requirement usually does not represent a limitation in

calculation methodology because the initial capital outlay is usually a negative cash flow and the annual cash f

projections are usually positive. If both the initial capital outlay and the annual cash flow projections are negative, an I

cannot be calculated simply because there is no return on investment. A 0% value will therefore be the calculation result.

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Excel Skills | Business Valuation Template

Instructions

Estimated Business Valuation

The estimated business valuation is also calculated by using the NPV function but the business acquisition price (in

capital outlay) is not included in the calculation. The calculation is therefore based only on the WACC and the annual c

flow projections. The calculation result therefore indicates what the estimated value of the projected annual cash flows a

the cash flows are discounted by the required investment return.

The estimated business valuation can therefore also be interpreted as the amount of capital that needs to be contribute

order to produce the projected annual cash flows at the required return on investment (the WACC). If the busin

acquisition price exceeds the estimated business valuation, it means that the required investment return cannot be achie

and vice versa.

Note: The estimated business valuation is also calculated by discounting the projected annual cash flows by the WACC

discussed under the Net Present Value section of the instructions). As we've mentioned before, the WACC calculatio

subjective because it is based on the investment return that the shareholders or business owners require. If the return

equity that is required is overstated, it may therefore result in a lower estimated business valuation being calculated and

business acquisition price may therefore seem overstated. We therefore recommend that users perform sensitivities on

required investment return input variables in order to test the impact of different levels of return on the estimated busin

valuation calculation.

Another way of looking at the estimated business valuation calculation is that it can be calculated by adding or subtrac

the NPV calculation result from the business acquisition price (the initial capital outlay). An important point to note about

calculation methodology is that the assumption is made that the valuation can be calculated based on a constant WACC

effect, this assumption means that the debt / equity ratio that is included in the financing of the business acquisi

(business acquisition price) will remain constant even if the estimated business valuation differs from the business acquisi

price. We have therefore included the equity and debt financing amounts on which the estimated business valuation is ba

in rows 21 and 22.

Note: If the calculated debt and equity amounts in rows 21 and 22 are not attainable, you should amend the busin

acquisition price and the loan amount that is specified on the Assumptions sheet in order to calculate a new WACC and t

measure the impact that this adjustment has on the estimated business valuation that is calculated. In most scenarios,

impact on the estimated business valuation should not be material.

For example: If the maximum loan amount that can be obtained through debt financing is 800,000 and the estima

business valuation is based on a debt amount of 870,000, you should change the business acquisition price in cell B43

the Assumptions sheet to the estimated business valuation that was previously calculated and retain the 800,000 l

amount in cell B44 on the Assumptions sheet. By amending the business acquisition price and keeping the loan amo

constant, a new WACC will be calculated and the estimated business valuation will therefore also change. The sa

technique can be used to perform a number of sensitivities in order to measure the effect that different WACC calculati

have on the calculation of the estimated business valuation.

Note: As you can see, this template can be used to perform a number of sensitivities on the calculation o

business valuation in accordance with the discounted cash flow methodology and therefore adds immeasura

value to the process of making a decision on whether a business acquisition price is reasonable or sim

calculating an estimated valuation for an existing business. The template is therefore an extremely useful tool

the parties involved in buying a business, the parties involved in selling a business and business owners t

simply want to determine what their businesses are worth!

Net Cash Flow After Debt Repayment

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Excel Skills | Business Valuation Template

Instructions

The net cash flow after debt repayment calculation has been included at the bottom of the Valuation sheet in order to prov

users with an indication of the annual net disposable cash flow that is available after meeting debt repayment obligatio

The net cash flow after debt repayment is calculated by deducting the annual debt repayments from the annual net cash f

projections that are calculated on the CashFlow sheet.

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Excel Skills | Business Valuation Template

Instructions

The annual debt repayment amounts are calculated from the loan amount that is entered in cell B44 on the Assumpti

sheet, the interest rate (cost of debt) that is entered in cell B45 on the Assumptions sheet and the repayment period tha

entered in cell B46 on the Assumptions sheet.

Note: This calculation is especially useful for owner managed businesses where the owner's market related salary has b

included in the Salaries line on the annual cash flow forecast and the owner needs to determine the total earnings that

be derived from the business based on the net disposable cash flow that will be available. The market related salary

therefore be added to the net cash flow after debt repayment in order to calculate an estimated total annual earnings amo

before tax.

Help & Customization

If you experience any difficulty while using this template and you are not able to find the appropriate guidance in th

instructions, please e-mail us at support@excel-skills.com for assistance. This template has been designed with flexibilit

mind to ensure that it can be used in most business environments. If however you need an Excel based template tha

customized specifically for your business requirements, please e-mail our Support function and provide a brief explanatio

your requirements.

© Copyright

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Page 17 of 20

Business Valuation

Assumptions

© www.excel-skills.com

Turnover

Estimated Annual Turnover Annual Increase %

Gross Profit %

Estimated Gross Profit %

Expenses

Accounting Fees Advertising & Marketing Bank Charges Cleaning Expenses Computer Expenses Consumables Electricity & Water Entertainment Equipment Hire Insurance Legal Fees Motor Vehicle Expenses Postage Printing & Stationery Professional Fees Rent Repairs & Maintenance Salaries & Wages Security Subscriptions Telephone & Fax Training Uniforms

Add new expense items above this row

Annual Increase %

Working Capital

Inventory

Debtors

Creditors

Capital Expenditure

Annual Capital Expenses

Acquisition Price & Financing

Business Acquisition Price Loan Amount Cost of Debt (annual loan interest rate) Repayment Period in Years Required Return on Equity (before taxation)

Start-up

Year 1 Year 2 Year 3 Year 4 Year 5 3,250,000 10.0% 5.0% 5.0% 5.0% 33.0%
Year 1
Year 2
Year 3
Year 4
Year 5
3,250,000
10.0%
5.0%
5.0%
5.0%
33.0%
35.0%
35.0%
38.0%
38.0%

compile

the

the

the

the

five

five

and

and

and

and

The

The

gross

gross

input assumptions on this sheet are used to automatically compile

business

business

turnover,

turnover,

On this sheet:

On this sheet:

valuation calculations on the “Valuation” sheet. The

valuation calculations on the “Valuation” sheet. The

year cash flow projections on the “CashFlow” sheet

year cash flow projections on the “CashFlow” sheet

profit percentages, expenses, working capital balances

profit percentages, expenses, working capital balances

input assumptions on this sheet are used to automatically

input

to

to

The

The

that

that

Note

Note

used

used

input

calculate the WACC which is used as the discount rate for discounted

capital

capital

projections.

projections.

you can add additional expense items if required.

you can add additional expense items if required.

expenditure amounts are included in the cash flow

expenditure amounts are included in the cash flow

assumptions in the Acquisition Price & Financing section are

assumptions in the Acquisition Price & Financing section are

calculate the WACC which is used as the discount rate for discounted

cash flow calculation purposes.

cash flow calculation purposes.

8.0% 7.0% 10.0% 10.0%
8.0%
7.0%
10.0%
10.0%

150,000

170,000

190,000

200,000

220,000

245,000

240,000

260,000

300,000

330,000

365,000

405,000

(100,000)

(110,000)

(120,000)

(130,000)

(145,000)

(150,000)

- - - 250,000 300,000
-
-
-
250,000
300,000
1,000,000 800,000 9.0% 5 20.0%
1,000,000
800,000
9.0%
5
20.0%

Page 18 of 20

Business Valuation

Cash Flow Projection

© www.excel-skills.com

 

Monthly

Year 2

Year 3

Year 4

Year 5

 

Average

Year 1

Turnover

 

270,833

3,250,000

3,575,000

3,753,750

 

3,941,438

4,138,509

Cost of Sales

181,458

2,177,500

2,323,750

2,439,938

2,443,691

2,565,876

Gross Profit

89,375

1,072,500

1,251,250

1,313,813

1,497,746

1,572,634

Gross Profit %

33.0%

33.0%

35.0%

35.0%

38.0%

38.0%

Expenses

   

Accounting Fees

 

2,000

24,000

25,920

27,734

 

30,508

33,559

Advertising & Marketing

5,000

60,000

64,800

69,336

76,270

83,897

Bank Charges

       

4,195

Cleaning Expenses Computer Expenses Consumables

This

This

five year annual cash flow projection is automatically compiled from

five year annual cash flow projection is automatically compiled from

assumptions that are entered on the “Assumptions” sheet. The only

assumptions that are entered on the “Assumptions” sheet. The only

On this sheet:

On this sheet:

 

the

the

user

user

8,390

5,593

20,974

Electricity & Water

input

input

that is required on

that is required on

section if additional expense items have

section if additional expense items have been added to the “Assumptions”

   

this sheet is adding additional rows in the Expenses

this sheet is adding additional rows in the Expenses

been added to the “Assumptions”

16,779

Entertainment

sheet.

sheet.

   

11,186

Equipment Hire

     

8,390

Insurance

833

10,000

10,800

11,556

 

12,712

13,983

Legal Fees

375

4,500

4,860

5,200

5,720

6,292

Motor Vehicle Expenses

3,000

36,000

38,880

41,602

45,762

50,338

Postage

167

2,000

2,160

2,311

2,542

2,797

Printing & Stationery

458

5,500

5,940

6,356

6,991

7,691

Professional Fees

1,417

17,000

18,360

19,645

21,610

23,771

Rent

10,000

120,000

129,600

138,672

152,539

167,793

Repairs & Maintenance

917

11,000

11,880

12,712

13,983

15,381

Salaries & Wages

20,417

245,000

264,600

283,122

311,434

342,578

Security

1,083

13,000

14,040

15,023

16,525

18,178

Subscriptions

483

5,800

6,264

6,702

7,373

8,110

Telephone & Fax

2,333

28,000

30,240

32,357

35,592

39,152

Training

1,500

18,000

19,440

20,801

22,881

25,169

Uniforms

417

5,000

5,400

5,778

6,356

6,991

Total Expenses

54,900

658,800

711,504

761,309

837,440

921,184

Net Profit before Interest & Tax

34,475

413,700

539,746

552,503

660,306

651,449

Changes in Working Capital

(2,500)

(30,000)

(50,000)

(30,000)

(40,000)

(60,000)

Inventory

 

(1,667)

(20,000)

(20,000)

(10,000)

 

(20,000)

(25,000)

Debtors

(1,667)

(20,000)

(40,000)

(30,000)

(35,000)

(40,000)

Creditors

833

10,000

10,000

10,000

15,000

5,000

Capital Expenditure

 

-

-

-

-

(250,000)

(300,000)

Annual Cash Flow

31,975

383,700

489,746

522,503

 

370,306

291,449

Page 19 of 20

Business Valuation

Valuation Summary

© www.excel-skills.com

Weighted Average Cost of Capital (WACC)

 

On this sheet:

On this sheet:

Amount

200,000

%

20.0%

Cost

20.0%

WACC

4.0%

This sheet includes all the business valuation

This sheet includes all the business valuation

calculations. The WACC calculation is based

calculations. The WACC calculation is based

on

on

the

the

800,000

1,000,000

80.0%

100.0%

9.0%

7.2%

11.2%

input assumptions that are specified in

input assumptions that are specified in

the

the

Acquisition Price & Financing section on the

Acquisition Price & Financing section on the

 

“Assumptions” sheet.

“Assumptions” sheet.

Start-up

Year 1

Year 2

Year 3

Year 4

Year 5

 

(1,000,000)

383,700

489,746

522,503

370,306

291,449

3 Years

5 Years

 

121,106

17.7%

1,121,106

224,221

534,699

31.6%

1,534,699

306,940

The net present value (NPV), internal rate of return (IRR) and the

The net present value (NPV), internal rate of return (IRR) and the

5

estimated business valuation are calculated for both a 3 year and

estimated business valuation are calculated for both a 3 year and

a

a

5

year

year

period based on the WACC and the annual cash flows that

period based on the WACC and the annual cash flows that

are

are

debt

debt

the

the

compiled on the “CashFlow” sheet. The net cash flow after

compiled on the “CashFlow” sheet. The net cash flow after

repayment is an indication of the net disposable cash flow. All

repayment is an indication of the net disposable cash flow. All

calculations on this sheet are automated – no user input is required

calculations on this sheet are automated – no user input is required

on

on

896,885

1,227,760

this sheet.

this sheet.

Year 1

Year 2

Year 3

Year 4

Year 5

 

383,700

489,746

522,503

370,306

291,449

(205,674)

(205,674)

(205,674)

(205,674)

(205,674)

178,026

284,072

316,829

164,632

85,775

Equity

Debt

Acquisition Price

Cash Flow Calculations

Annual Cash Flow Projections

Business Valuation Calculations

Net Present Value (NPV)

Internal Rate of Return (IRR)

Estimated Business Valuation:

Based on WACC of 11.2%

Equity

Debt

Net Cash Flow After Debt Repayment

Annual Cash Flow Projections

Annual Debt Repayment

Net Cash Flow After Debt Repayment

Page 20 of 20