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Valuation Risk Scoring Tool

Source: Playbook v2 EN — Appendix G

Formula: Business Value = Annual Cash Flow ÷ Yield Rate

Each ticked item = 1 point. Higher score = lower risk = lower yield rate.

1. Financial Performance

  • ☐ Revenue growing year over year
  • ☐ Gross margins are stable and healthy
  • ☐ Majority of revenue is recurring (contracts / standing orders)
  • ☐ Cash flow is regular and predictable
  • ☐ Debt levels are low and manageable
  • ☐ Revenue is not significantly seasonal

2. Market Position

  • ☐ Target market is large and growing
  • ☐ Clear competitive advantage / unique selling proposition
  • ☐ High barriers to entry for competitors
  • ☐ Strong customer loyalty and retention
  • ☐ Brand is well known in the market
  • ☐ Favourable position vs. competitors (price, quality, or niche leader)

3. Operational Strength

  • ☐ Business can operate without the owner's daily involvement
  • ☐ Skilled, reliable, and loyal staff
  • ☐ Efficient processes with minimal waste
  • ☐ Operational software and automation in use (CRM, scheduling, invoicing, etc.)
  • ☐ Documented work processes
  • ☐ Consistent quality control system
  • ☐ Business model is scalable without large cost spikes
  • ☐ Reliable and diversified suppliers

4. Intangible Factors

  • ☐ Strong brand reputation
  • ☐ Google rating above 4.0 with at least 30 reviews
  • ☐ Intellectual property protected (trademarks, patents, copyrights)
  • ☐ Exclusive supplier or customer agreements
  • ☐ Proprietary technology or unique processes
  • ☐ Long-term customer and supplier contracts
  • ☐ Strong relationships with industry players and partners

5. Risk Factors

  • ☐ No single customer represents more than 20% of revenue
  • ☐ Industry is stable and not highly cyclical
  • ☐ Full regulatory and permit compliance
  • ☐ No active litigation or disputes
  • ☐ Revenue is not tied to a single geographic area
  • ☐ No 'key person risk' (one person leaving does not paralyse operations)
  • ☐ Contingency or crisis management plan in place

Score → Yield Rate Table

Score Risk Profile Yield Rate What it means
29–34 Low Risk 20% Stable business, solid systems, predictable results. Easy to take over.
20–28 Moderate Risk 25% Some gaps, but generally strong. Buyer will need to make improvements.
10–19 High Risk 28% Multiple operational or financial weaknesses; higher return requirement.
0–9 Very High Risk 30%+ Significant gaps; owner-dependent; results hard to predict.

Example Calculation

If annual cash flow = €74,500 and risk profile yields 28%:

Value = €74,500 ÷ 0.28 ≈ €266,071

Why it works: Higher risk means the buyer demands a greater return on every euro invested. The same cash flow must cover a higher return requirement — which reduces the business's value.

Note: Always use adjusted cash flow (see playbook-thesis — the Melers Pattern). Reported profit is almost never the right input to this formula.