Valuation Worksheet

Company Background

Describe the company’s legal structure.

Company’s legal name:

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Type of entity (corporation, partnership, proprietorship):

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Date of incorporation or formation:

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For corporations:

State incorporated:

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Number of common shares authorized:

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Par value:

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Number of shares issued and outstanding:

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Briefly describe other types of stock:

Briefly describe the rights of the equity ownership interests described above.

Briefly describe the subject ownership interest to be valued.

List the major stockholders, partners, or owners of the company and their percentage of ownership or number of shares owned.

Name % Ownership or Number of Shares

Owned

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Briefly describe how the different ownership interest of other owners affect the value of the subject interest. Also, based on this analysis, does the subject ownership interest exhibit control characteristics?

List all known related parties (that is, subsidiaries, affiliates, or relative) that the company does business with.

Name Relationship

Lit each location maintained by the company and the primary activity at each, that is, executive office, plant, sales office, etc.

Location Activity

Discuss evolution of (a) product lines, (b) customer base, (c) locations, (d) marketing activities, (e) distribution methods, (f) employees, (g) acquisitions, and (h) ownership.

Other key dates or events in company history.

Products or Services

Description of the company’s products or services:

How are the product or services used?

Describe the company’s customer base.

Breakdown of sales and gross profit by product line:

Product Precent of Sales Gross Profit Percentage

Which product line is growing fastest?

Slowest?

How diversified are the product lines? Do all sales depend on the same factors?

Are there existing plans to expand, cut back, or delete existing product lines or introduce new product lines? If so, describe.

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What are the products’ advantages and disadvantages versus its competitors?

Disadvantages:

Are the product proprietary? Does the company have patents, technology, or expertise that prevents other from copying the products? If o, when will the protection for those items expire?

What other product compete with the company’s products?

Are sales cyclical? What economic factors (inflation, interest rates, etc.) affect sales?

Are sales seasonal?

Discuss any industry technology trends. What trends may affect sales?

Discuss the company’s research and development efforts, the importance of new products, and the annual cost of research and development activities.

Marketing and Distribution

What is the size (in dollars) of the market in the industry?

What is the company’s market share? How fragmented is the market? Is the market growing or shrinking?

What distribution channels does the company use (direct sales, distributors, retailers, Internet, etc.)? How successful are they?

How are sales people compensated?

What is the market area and what determines its size? How important are freight costs?

Are sales concentrated in a few customers? What percentage of total sale is made to the five largest customers?

Are sales concentrated in a few customers? What percentage of total sales is made to the five largest customers?

What percent of sales are obtained from bids? Is price the only factor considered by the potential customer in awarding the job? If not, what other factors are considered?

Does the company sell to the federal, state, or local government or government agencies? Are those sales likely to increase or decrease?

What is the key selling feature-product, price, service, brand name, packaging, etc.?

How are pricing policies determined? To what degree do competitors’ prices affect company policy?

What are normal sales and credit terms? Describe a typical customer.

What type of promotion and advertising methods does the company use?

Competition

Who are the company’s major competitors? Where are they located? How big are they? What is their market share? How diversified are they? Identify those competitors (if any) that are publicly held.

How does the company compare in size and market share to its competitors?

How easy is it to enter the industry? What are the barriers to entry?

What are the company’s competitive strengths and weaknesses?

Operations

Describe the company’s organization structure. (Attach organization chart, if available.)

What is the relative of the company’s divisions in terms of sale and gross profits? How interrelated are the divisions? How much vertical integration is there among the divisions? How much vertical integration is there among the divisions? How easily can a division be eliminated without affecting other operations?

How old are the company’s manufacturing facilities? Where are they located relative to the primary markets?

Describe the manufacturing or service process. Are any of the methods or equipment proprietary?

What is plant capacity relative to current operating levels? How many shifts and days per week does the company operate? Might sales be constrained by inadequate capacity? Is there excess capacity or excessive fixed overhead costs?

Are buildings and machinery owned or leased? If leased, are the lease renewable and on what terms? Provide a summary of all leases for machinery and equipment.

What is the overall condition of the company’s equipment, including it business information systems? Is there any inefficient or obsolete equipment? When is the machinery likely to be replaced? What is the likelihood of major repairs?

How capital-intensive is the company? How labor-intensive?

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Briefly describe past and current employee relations (that is, contentions, harmonious, strikes, etc.). Also discuss employee turnover and indicate whether of the employees are unionized.

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Discuss the current labor market. How easy is it to attract qualified employees?

How extensively are independent contractors used?

Discuss key suppliers. Are any suppliers the sole source? Have there been any major problems in getting raw materials? Are there long lead times to get the purchased goods?

Does the company have difficulties company with environmental regulations?

Are there any potential local, state, or national initiatives for new environmental regulations that may affect the company’s operations? If so, what is the probability that the regulation(s) will be implemented?

Does the company have any foreign operations? If so, does the company have any problems with any foreign governments?

Discuss the effects of any federal or state regulation or subsidies on the company’s operations.

Management

List key members of management.

Name Title

Discuss the company’s officers (age, health, education, experience, and current duties).

Discuss any turnover in key members of management over the last five years.

Discuss basis of compensation. Also, describe employee benefits (insurance, stock options, profit sharing, etc.).

How does the owner’s compensation compare with the industry average?

Discuss any employment contracts and, if applicable, non-compete agreements that will expire in the next five years.

How easily can officers be replaced (i.e., there one or a few key officers on which the success of the company depends that cannot be easily replaced)?

Who is on the board of directors and how is the board in governing company activities?

Describe any contractual obligations or restrictions, such as stockholder/ partnership/ operating agreements, buy-sell agreements, and loan covenants, which may require consideration during the engagement?

Financial

Describe the nature of any report qualifications or unusual matter noted in the company’s financial statements that may affect engagement.

If year-end financial statements are not available for the last five years (or period since inception if less than five years), briefly describe how this may affect the engagement (such as including a caveat in the report, compiling those statements as part of the engagement, or using tax returns instead).

Briefly describe any unusual matters noted in the tax returns that may require special consideration during the valuation.

Has there been any change in accounting principles during the past five years (cash to accrual, FIFO to LIFO, etc.) or similar change that might affect the comparability of the financial statements?

Describe any relevant specialized industry accounting practices or principle.

Has there been any nonrecurring or extraordinary income or expenses during the last five years?

What are the main discretionary expenses (such as bonus, profit sharing, repairs, advertising, and R&D)? How have the levels of those expenses changed during the last five years?

Describe short-term sources of credit and how they were used during the last five years.

Describe long-term sources of credit and how they were used during the last five years.

Discus any special stock rights, warrants, options, etc.

Discuss the company’s dividend history.

Have there been any transactions involving interests in the company in the last five years? Provide details.

Describe any written or oral offers received for the company in the last five years.

Discuss any plans to sell all or part of the company or hold a public offering.

Has the business previously appraised? If so, when, for what purpose, and what was the valuation?

Discuss plans for major capital expenditures, how they will be financed, and how much represents expansion versus replacement of existing assets.

Discuss any contingent liabilities, including lawsuits and pending or threatened litigation.

Describe any non-operating assets, such as aircraft, boats, and real estate investments, and any intangible assets of the business that are not reflected in the company’s balance sheet.

Describe the rights included in or excluded from each intangible asset (including licensing agreement, nondisclosure agreements, development rights, commercialization and exploitation rights, and other contractual obligations).

Company Expectations

Describe relevant pat and expected future trends for the company, such a growth patterns, expansion or cutbacks of business segments, possible spinoffs, mergers or acquisitions.

Describe the company’s future expectations, goals, objectives, and long-range plans in the following areas:

Products and services.

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Marketing and customers.

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R&D and technology.

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Comments and Observations

Describe any matter to be considered in applying the valuation methods selected. Factors to consider include:

Growth expectations.

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Financial condition.

Management depth and competence.

Product, customer, and geographic diversification.

Business risks.

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