Can you explain the nature and key aspects of the BizEquity valuation tool and algorithm?

Our valuation algorithm mimics the work that a professional business appraiser would perform by utilizing methods from the income and market approach ( and even the cost approach in terms of determining liquidation value). At the same time, the algorithm also "mirrors the marketplace" based on the usage of the same general set of valuation methods and value drivers that are utilized by real world buyers and sellers. In the end, this is the primary task of the appraiser - recreate the scenario that reflects the give and take of buyer and seller on the open market. We are estimating what the business would likely sell for - not what we think it should be worth.

We go far beyond using current market multiples which are "size effected" to dynamically account for the firm' relative profitability and growth as well as key value drivers such as customer concentration, dependence on the owner (key man risk) and much more. In general, the primary value determinants are size, profitability and growth - as affected by the various value drivers just referenced. Higher earnings, higher profit margins and higher growth are associated with higher business value.

In short, the multiples used to generate the base value (asset sale value - reflecting the value of the inventory, FF&E and all intangible assets such as tradename, customer base and goodwill) are:

Industry-specific

Size-adjusted

Company-specific risk-reflective

Regularly updated

BizEquity uses its proprietary patented software to gather and compile the “comparable data” on a regular basis from over 25 distinct database sources that track corporate sales figures.  These include such highly regarded database leaders as Bizcomps for business brokerage segment companies and GF Data for Midmarket companies and the IRS Corporate Ratios Comparable Database for all firms of all sizes in all industries.  Using these up-to-date comprehensive market comps and benchmarking data, BizEquity compiles over 18,000 of the most common “aliases” and sub- aliases (detailed industry classifications), by specific zip code. This enables BizEquity to provide the most accurate comparative analysis available in the market today.