Owner Benefit Valuation

This formula focuses on the seller's discretionary cash flow, and is used most often for valuing businesses whose value comes from their ability to generate cash flow and profit. It uses a fairly simple formula: multiply the owner benefit times a multiple consistent with the industry to get the market value. George and Company will carefully examine the Seller's income statement to identify non-recurring and discretionary expenses. After a reasonable conclusion is reached that the expenses are non-requisite to the operation of the company they are added to cash flow. Certain non-cash expenses like depreciation and amortization may also be added to cash flow. The total of the owner benefit is usually multiplied by an industry specific number to arrive at market value. The owner benefit could be viewed as a large pie from which thew buyer will take his/her salary, service debt, take perquisite expenses, etc.