This valuation is based on the discounted cash flow valuation model. It has been adopted slightly for simplicity and to accommodate smaller businesses. This method of valuation is the one typically used by most buyers in establishing the value of your cash flow to them. This valuation may not include intellectual property, inventory, and other assets or liabilities. As you will see, your valuation is based on future cash flow and justifying this growth rate to a buyer will be a critical part of justifying value.
We suggest that this valuation be strictly used as a guideline and not be shared with potential buyers or be used as an absolute price you must obtain to sell. Business valuations are VERY tricky and subjective on the "appraiser" and thus this valuation should not be taken as a serious valuation.