6 VALUE DRIVERS

Building a stronger, better business.

THAT MAKE YOUR BUSINESS WORTH MORE

Better businessesmake more moneyValue drivers are external andinternal factors that affect buyerperception of business value. Themore perceived value, the highersale price. Not only that, these keyfactors go hand in hand withbuilding a stronger, better businessthat will make you more moneywhile you own it.

For what it's worth

Generally, strategicbuyers, financial buyers

and private equityinvestors pay multiplesbetween 3-6x Adjusted

EBITDA whenpurchasing a business.

AdjustedEBITDA

3 - 6x

Earnings Before Interest, Taxes, Depreciationand Amortization where the EBITDA is adjustedfor unusual expenses and compensation andnormalized to more market based bene ts andcompensations required to operate the business.

Defined

Management

AdjustedEBITDA

1<3.0x 3 - 5x 6.0x +

Heavily ownerdependent

One or two personsenior managementin addition to owner

Well roundedmanagement, littleowner involvement

Financials

AdjustedEBITDA

2<3.0x 3 - 5x 6.0x +

Poor accountingsystems

No CPA involvement

No professionalaccounting staff

Limited accountingsystems

Compiled orprofessionallyreviewed financials

Controller on staff

Sophisticatedaccounting systems

Audited financials

Full time CPA orCFO

End Markets

AdjustedEBITDA

3<3.0x 3 - 5x 6.0x +

Completelydiscretionarysolution

Small, shrinkingmarket

Heavy governmentpressures orregulatoryconstraints

Considered a boomor bust business

Customers need orshould have solution

Low market growth

Governmentpressures promotingsolution

Cyclical business orcorrelated to GDP

Solution is non-discretionary

Large market, rapidgrowth

Steady businessgrowth, grewthrough recession

Little governmentinvolvement

Targeting Improvements

Some factors regarding your business arein your control, others are not. You can'tchange external factors such asgovernment regulation or market size.

Pinpoint the internal factors you cancontrol and focus on those.

Customers

AdjustedEBITDA

4<3.0x 3 - 5x 6.0x +

Top 3 customers>90% of revenue

Service agreementsw/ purchase orders

Small, localcustomers

Owner managescustomers

Top 10 customers<50% of revenue

Annual contracts

Middle market orregional customers

Dedicated salesman

No customer is over5% of revenue

Multi-year contracts

Blue chip multi-national customers

One-time andrecurring revenues

Project-based,lumpy revenues

Full sales/serviceteam

Small, recurringpurchases

Suppliers

AdjustedEBITDA

5<3.0x 3 - 5x 6.0x +

Top 3 suppliers>90% of purchases

No contracts

Core operationsoutsourced tosupplier

Can sell directly toyour customer base

Top 10 suppliers<50% of purchases

Annual contracts

Difficult but able toswitch

Occasional or hybridsupplier competition

No supplier >5% ofpurchases

Multi-yearagreements withexclusivity

Easy to switch

Exclusivity or non-competeagreements

Heavily reliant onproprietary products

Some reliance onproprietary products

Not reliant onproprietary products

Competition

AdjustedEBITDA

6<3.0x 3 - 5x 6.0x +

Highlycommoditizedproducts, lowmargins

Many competitors,no differentiation

Low entry barriers

Limited alternatives,average margins

Balanced industrymarket shares

Occasional/hybridcompetition

Proprietaryproducts, highmargins

Market leader, fewcompetitors

Hard to recreatesignificantcapabilities

Hold the note takingDownload or print the 1-page referenceguide covering the materials in thispresentation.

In search of more? Our Value AdvisorLibrary also has industry-specificreference guides.

www.vrnewhaven.com/value-advisor/

Professional ValuationThese are only a few variables and donot constitute a complete valuation.

A professional valuation is stronglyrecommended to determine anaccurate sale price.

Contact VR Business Sales to find outwhat your business is worth.

Thank You

COMPANY OVERVIEW

VR Business Sales New Haven represents owners ofbusinesses valued between $500,000 and $25million or with annual revenues from $1 million to$30 million. The office provides exceptional mergerands acquisition advisory services to companiesoperating within a wide range of industry segmentsin Connecticut, Southern New England and MetroNY. Independently owned and operated, the officeconsistently ranks within the Top 10 of over 50 VRoffices worldwide.

VR BUSINESS SALES | MERGERS & ACQUISTIONS

941 Grand Avenue, New Haven, CT 06511(203) 772-3773

www.vrnutmeg.com