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Glossary of terms used on this site

There are 73 entries in this glossary.
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Term Definition
Valuation Formula

IBT is income before tax. AV is agreed value. NBT is net business debt, the cash owning at a point in time after any insurance proceeds are accounted for. 'Multiple' is a number from one to five that when used to multiply income before tax will give a business value. The multiple is derived after factors of business size, tenure, contractual status, history and management stability is applied.

E.g. [IBT * Multiple] - Nett Business Debt (NBD) = BSA agreed value (AV)

Variable costs

The costs additional to fixed costs of running a business that can vary depending on the level of demand and business activity.

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Bruce says

We were looking for a method to ensure two of our senior partners could afford to retire in 4 years, and that we could afford to purchase their shares. Jim gave us much more than we expected and spent a great deal of time understanding our issues. His report is one of the most important in our business and will be often referred to in future years.