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Commercial in Confidence. © 2015 Saasu Pty Ltd. All Rights Reserved.
16th June 2015
BY Marc Lehmann CEO, Saasu [email protected] @saasu @marclehmann
CEO INSIGHTS
Know your business valuation
Disclaimer: General and Educational. Non advisory. Your financial planner & accountant are your advisors for your specific circumstances.
Why should we know our business valuation?
Avoiding Sharks
• Lowballing. • The “What price do
you want?” free option.
• Question sales,kill the dream.
• Syndicate to eliminate price tension.
• Cooling off after show free option.
• Feign unfamiliaritydebase the seller.
• Rescue bid.
Setting capital raisings
• Co-Founders • Family & Friends • Employees • Angels • Venture Capital • Private Equity • IPO’s
https://www.flickr.com/photos/toniblay/
Strategic Planning
Understand the metrics driving valuation and you can set strategy to impact those metrics.
⬆ 46.3%
1100
LEADS TRAFFIC VISITORS
1000
121
CALLS PITCH TRIAL
100
13.3
SHIP CLOSE SIGN
10
1.463
RECUR RETAIN CHURN
1
Growth is a derivative of disruption and execution !!!
Exit Planning
Valuations help you negotiate with confidence.
https://www.flickr.com/photos/renneville/
There is no answer to business valuation, just different answers
It’s what the buyer paid for it^ you could find
https://www.flickr.com/photos/bfishadow/https://www.flickr.com/photos/68783104@N05/
Bought$90mio
Listed$1Bio
👫 PV LTV
How markets value
🏦 Cashcow
% CGR
💵 MRR x
$ EBITDA x
💵 PV Cashflow
+- Technical
% Physiological
💼 Fundamentals
• Markets look at different business models in different ways
• Different investors value businesses in different ways
Multiples: EBITDA & ARR (Annual Recurring Rev.)
SHOPIFY ANALYSIS OF ECOMMERCE SITES
http://www.shopify.com/blog/17642316-how-to-sell-your-ecommerce-business-for-maximum-value
Discounted Cashflows
• PV of Future Cashflows probability adjusted (using EBITDA). • PV of Long Term Value of Customers.
Net Assets method
• Sale value = Goodwill + tangible assets. • Doesn’t work for IP heavy businesses. • Goodwill is hard to calculate quantitatively
https://www.flickr.com/photos/toyotauk/
Benchmarking valuations
• KPI - Unreliable KPI’s like P/E or future P/E ratios.• Yield - Biz A looks cheap because it’s yield is high versus Biz B• Perspective - Book Co with cloud computing vs. Cloud Computing Co that sells books.
https://www.flickr.com/photos/kuishimbo/
Startup’s
To learn about how to value startups and split equity watch https://vimeo.com/90274780
Multi-business model valuations
https://www.flickr.com/photos/stmaartenpiloot/
Oil trader
Labour Hire
Cargo
App Developer
Leasing Co
Affiliate Sales
IT&T
Valuation phenomena
Classical measures
• Internal vs External equity issuance • Retention period • Buyer payment profile • Depth of guarantees • Location of business • Industry/product lifecycle • Prior losses are useful • Level of risk mitigation • Revenue per employee
https://www.flickr.com/photos/dullhunk/
Classical valuation stories
“The way to value a business is blah blah blah”
The seller is always exiting. Why?
https://www.flickr.com/photos/jimsef/
Capital Yield vs. Dividend Yield
https://www.flickr.com/photos/funkybeatz/
Probability of Recapitalisation
https://www.flickr.com/photos/jasewong/
Can I judge my business value based on an IPO?
• IPOs are an in-accurate valuation because markets never sit at the IPO level + markets aren’t pure. • IPO’s are for the very retail end of investment, least savvy buyer in the market + ironically the most
savvy ‘forced’ buyers, fund managers needing to match index.
https://www.flickr.com/photos/quintanomedia/
Markets
• Small businesses can be self employment proxy - Franchises and sole trader businesses are often more valuable in crisis > people are buying jobs.
• Accounting firms were worth more in the GFC - Super dropped in value leaving accountants to delay retirement > sellers of practices back away.
ACCOUNTING PRACTICES INFLUENCED BY MARKET SEGMENT 0.9x to 1.2x fees advisory + company tax 0.3x to 0.6x fees individual tax returns
FINANCIAL PLANNERS INFLUENCED BY BROAD MARKET CONDITIONS 2007 2.0x to 5.5x. << Pre-reform 2008 2.0x to 3.0x << GFC 2012 2.3x to 3.5x << Consolidation
FIND OUT MORE www.saasu.com
CONTACT Marc Lehmann Chief Executive Officer, Saasu [email protected] @saasu @marclehmann
