Vestimate-Pro business values are based on transactional multiples, industry financial and market trend analysis applied to our proprietary calculation protocols.
Bizminer develops and publishes financial statement averages for about five thousand US industry classifications. Industry and sales class-specific data from Bizminer's industry financial analysis content is integrated into final Vestimate-Pro calculations. That content has been accepted in US Tax Court and is utilized by thousands of accounting, valuation, banking and business assistance professionals; by almost one hundred university libraries and by taxing agencies in multiple countries.
This core Bizminer content is integrated with Price/Earnings and Price/Sales multiples derived from almost 30,000 business transactions collected by DealStats. Bizminer conducts intensive cleaning for outliers in the DealStats transaction database at the NAICS-6 level after segregating the data by industry and size, scouring for outliers and creating four sized tiers (<$2.5m; $2.5m-$25m; $25m-plus and industry-wide) to develop multipliers used with our own enterprise sales and average industry performance content. Price/Earnings and Price/Revenue multiples are derived for five intervals: [Low]-[Quartile 1]-[Median]-[Quartile 2]-[High]. A series of core KPIs representing all five critical KPI categories (Cash Flow/Liquidity; Profitability; Efficiency; Debt-Risk; Market Opportunity) are then scored and applied using Bizminer’s proprietary algorithms to calculate a final business values or value range.
KPI variances for all selected years are applied to determine the KPI score. With two exceptions, all scored KPIs used for this value report are calculated using our Standard Scoring methodology, that is, higher is generally better:
- +/-10% from average= 3
- +11% to +20% above average= 4
- >20% above average= 5
- +11% to +20% below average= 2
- >20% below average= 1
Days Payable uses a Balanced Scoring framework, that is, closer to the industry standard is best, so that no variance from industry values would receive 5 stars. Days Receivable uses Reverse Scoring, where lower than the industry standard is better; 20% below the industry standard, for example, would receive 5 stars.
Displayed scoring is based on a scale of 1-5, with 5 being "best" and 1 being "worst". All percentages are shown as a variance from the industry peer group average.
Variances are also applied with more finely calibrated and weighted differentials to the final Vestimate-Pro business value calculations; weight values are assigned for each percentage point of variance for each KPI.
Final business values also incorporate one time income-expense addbacks noted by the report developer, which may not be visible in formal financial statements.
By default, the report applies 100% of the value calculations to the most recent year of inputs (including sales and market growth values if that data is available). If the developer chooses to integrate KPIs and other metrics into the final value calculation, values are weighted in the final calculations like this:
3-year Option: 2017: 20%; 2018: 20%; 2019: 60%
2-year Option: 2018: 33.3%; 2019: 67.7%
1-year Option: 2019: 100%
Market Analysis Values
The analysis integrates industry market volume trends, an industry site sales growth yardstick and a market penetration index developed at national and local levels in Bizminer’s Industry Market Trend report series. That content integrates the industry and custom market area selection with firm performance and scores the results.
Sales-related calculations are developed with firm‐level data which is integrated with BizMiner’s internally generated Sales per Employee projections. SPE data is both industry‐ and location‐specific; values are updated monthly by the application of US Census data and five industry and consumer price and productivity indices from the Bureau of Labor Statistics and other federal agencies.
The Sales per Household metric integrates Census data with Bizminer’s industry market sales calculations to produce Sales per Household values applied to the Market Opportunity Index. Although it is displayed in tables, the Market Opportunity Index is not applied to scoring or business value calculations where the selected market is US (due to lack of a market comparison), or where the industry is overwhelmingly B-to-B, including these parent NAICS and their offspring: 11; 21; 31-32-33 (except 3118; 311991; 323111; 323113); 33; 42; 481; 482; 483111; 483211; 486; 493; 512; 533; 55; 5611; 5612.
Cessation rates track the experience of business establishments, firms, small businesses, branches and startups doing business at the start of the time series, and still in operation today. Firms which relocate but maintain independent operations are considered survivors if they do not move out of the jurisdiction being analyzed. Firms which become subsidiary locations, or whose location is terminated, are grouped with others which ceased operation. Any business entity which does not evidence ongoing operations (for example, by registering with government agencies, credit reporting services or business directories) is considered to have ceased viable operations and is classified in the "ceased operation" category.