1. #

2. August 26, 2014 New Orleans, Louisiana Presented By: Vanessa Brown Claiborne, CPA/ABV, ASA 2 A Presentation For:

3. I.Introduction to Business Valuation II.Valuation Examples III.Payment Methods IV.How to Achieve a Great Big Price 3

4. 4

5. 1.Reasons for a Business Valuation 2.Analyzing Qualitative Factors 3.Valuation Process 5

6. Merger/Acquisition/Fairness Opinions Family Succession Planning/Estate and Gift Taxes Employee Share Ownership Plans (ESOP) Buy-Sell Agreements Executive Compensation (Options/SARS) Stock Repurchase or Recapitalization Fair Value Accounting Income Tax 6

7. Relevant economic data (Global, National, Local) Industry factors Competition Regulation Product or service lines Supplier relationships Market position Management and employees Adequacy of physical facility Operating efficiencies and inefficiencies 7

8. National Economic Data Regional and Local Economic Data 8

9. Markets Channels of Distribution Technology Sources of Industry Information 9

10. Existing Competition Potential Competition 10

11. Present Regulation Potential Changes in Regulatory Environment 11

12. Existing Lines Opportunities for Related Lines Patents, Copyrights, Trademarks Relative Profitability of Lines Service or Warranty Obligations 12

13. Continuity Degree of Exclusivity Contractual Relationships 13

14. Reputation Geographic Scope Method of Marketing and Distribution Pricing Policies Customer Base Customer Relationships Market Continuity, Growth Opportunities and Weaknesses 14

15. Size and Composition of Work Force Key Employees –Noncompete agreements –Employment contracts Other Employees Compensation Personnel Policies, Satisfaction, Conflict, and Turnover Management Depth 15

16. Condition Heat, Light, Plumbing, and Other Systems Size Continuity of Occupancy 16

17. Physical Plant Accounting and Other Controls 17

18. Gather company data Site visit Research economic and industry information Analyze company financial statements Tests of valuation Discounts, premiums, and value conclusion 18

19. 1.Fair Market Value 2.Fair Value 3.Investment Value 4.Intrinsic Value 19

20. The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts (ASA BVS definition) 20

21. Has two different contexts: –Fair value for legal purposes Usually defined by various authorities an statutes –Fair value for financial reporting purposes The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (FASB ASC 820, formerly SFAS 157) 21

22. Specific value to a particular investor based on individual investment requirements –This extremely small and limited market is typically characterized by a premium because of the unique synergies the perceived particular buyer would realize as a result of acquiring the asset 22

23. Amount an investor considers to be “real” worth of an item based on evaluation of available facts; may be above or below fair market value 23

24. 1.Earnings before Interest, Depreciation and Amortization (“EBITDA”) 2.Sellers Discretionary Earnings (“SDE”) 3.Enterprise Value 24

25. Earnings before interest expense, taxes, depreciation and amortization (cash flow available to all capital providers) Net income +interest expense on long term debt + income taxes +depreciation and amortization EBITDA 25

26. Seller’s Discretionary Earnings: The earnings of a business enterprise prior to the following items: Income taxes Depreciation and amortization Interest expense or income Owners total compensation for one owner/manager after adjusting the total compensation of all owners to market value 26

27. (“TEV”) = equity + long term debt Pricing multiple = (Equity + LT debt)/EBITDA Equity = pricing multiple x EBITDA – LT debt. 27

28. There are several valuation approaches in valuing a company: 1.Market approach 2.Income approach 3.Asset approach 28

29. Previous sales of or offers for the Company’s stock Sales of similar companies Sales of stock of publicly traded companies Rules of thumb 29

30. Discounted cash flow method Capitalization of earnings method Excess earnings method 30

31. Liquidation model Net asset value 31

32. 32

33. I.Retail Boutique II.Professional Consulting Practice 33

34. 34

35. 35

36. 36

37. Rules of Thumb for Small Specialty Retail Stores –15-20% of annual sales plus inventory –1.8 to 2.2 times SDE plus inventory 37

38. 38

39. Buyer receives a loan for 60% and 80% of the purchase price with a 5 year term, and a 5% rate. 39

40. 40

41. 41

42. 42

43. Rules of Thumb for Consulting Practice –60.00% of annual sales Many consulting businesses are one-man operations or are headed by someone who has the contacts and may basically be “the business.” This person may be the goodwill, and without her presence the business may not be worth much. If this person stays while the business is slowly being transferred and an earnout is in place, the value may still be there. 43 Source: 2014 Business Reference Guide

44. 44

45. 45

46. Cash Percentage of Retained Revenue/Earnout Seller Note 46

47. Receive 33% of Retained Revenue each of the next 3 years. 47

48. 48

49. Keywords: Predictability & Growth Business can run without the seller or seller can stay on and successfully train buyer Reliable financial statements Customer contracts or long-term relationships Secure, exclusive supply agreements Location-ownership of property or long-term lease Ability to increase future cash flow by –Expanding product line, hiring more employees, expanding geographic market, etc. 49

50. Vanessa Brown Claiborne, CPA/ABV, ASA vbrown@chaffe-associates.com Chaffe & Associates, Inc. 201 St. Charles Ave. Suite 1410 New Orleans, LA 70170 www.chaffe-associates.com 50