Forecast and Analysis Models for Established Businesses

The models for established businesses provide members with an easy-to-use method for creating financial forecasts for businesses that have one or more years of historical financial information. The principal models are as follows:

• Established Business Financial Forecast Model

  This model operates on your historical financial information, which you are prompted to enter. The historical information, plus a few assumptions, creates the first draft of a comprehensive five-year financial forecast for the business. This first draft is principally a "momentum forecast" - a forecast based largely on the businesses' historical performance.

  The output of the established business forecast model consists of the primary financial statements - annual income statements, balance sheets and cash flow statements; several pages of documentation detailing the key assumptions underlying the forecast; and forecasted financial ratio data and statistics which are used by business managers, banks and other providers of capital to evaluate financial performance.

Once the user has created the multi-year forecast for the established business, she may chose to estimate the business' value to a prospective buyer of the business; and to a minority investor who wishes to invest in the business.

• LBO Valuation Model

  The already-completed five-year financial forecast, plus a few assumptions, are all that is necessary to create a first draft of a comprehensive LBO valuation of the business.

  The valuation of the business from a sale standpoint consists of an LBO valuation from the point of view of a "financial buyer" who owns no other businesses in the firm's industry and, therefore, expects all of its investment return to result solely from the future operations of the business. See the LBO Valuation Model for additional information about this analysis method.

  The output of the model consists of the Business Valuation Summary; primary financial statements (annual income statements, balance sheets and cash flow statements) showing the performance of the business prior to and after the purchase by the financial buyer; several pages of documentation detailing the key assumptions underlying the valuation; and actual and forecasted financial ratio data and statistics.

  You may change any or all of the first draft assumptions, including the financial forecast, to see how the changes impact the valuation of the business.

• Private Equity Placement Model

  The already-completed five-year financial forecast, plus a few assumptions, are all that is necessary to create a first draft of a private equity placement analysis of the business.

  The valuation of the business from the minority investor point of view consists of estimating the "pre-money" and "post-money" value of the business, and the reasonable ownership split(s) between existing and new investors immediately after new investors make equity investments in the business. For purposes of the analysis, equity investments include any or all of the following: investments in common stock (or contributed capital); investments in preferred stock; and investments in subordinated debt with equity warrants. See the Private Equity Placement Model for additional information about this analysis method.

  The output of the model consists of the Private Equity Placement Summary; primary financial statements (annual income statements, balance sheets and cash flow statements) showing the performance of the business prior to and after the new equity financing; several pages of documentation detailing the key assumptions underlying the analysis; and actual and forecasted financial ratio data and statistics.

  You may change any or all of the first draft assumptions, including your five-year forecast, to see how the changes impact the "pre-money" and "post-money" value of the business.

• Single-Year Forecast Model

  The single-year model enables the user to create single year forecasts (i.e., split a single year's forecast into twelve (12) individual monthly forecasts) for any year's forecast created with the financial forecast model, the LBO valuation model and the private equity placement model. The already-completed annual forecast, plus a few assumptions concerning business seasonality and cost behavior, create the first draft of a comprehensive twelve (12) month financial forecast by month. See the Single-Year Financial Forecast Model for additional information about this analysis method.

  The output of the single-year financial forecast model consists of the primary financial statements - monthly income statements, balance sheets and cash flow statements; documentation detailing the key assumptions underlying the forecast; and forecasted financial ratio data and statistics.

Contact tgf@corpfin.net for details concerning how Corpfin.Net can help you interpret and fine-tune your analyses.