Business Technology

Technology Heroes

We rescue clients from their computer headaches. Jones & Roth has a team of experienced Microsoft Certified Systems Engineers on staff. They can help you defeat your technology monsters.

Business technology utilization and needs assessment

Analyze and evaluate your company’s use of information systems and other technology that could impact your business and profitability. We’ll ensure appropriate security measures are in place and functioning properly. We’ll issue to you a company-wide report card on your technology utilization and critical needs.

Strategic technology planning and implementation

Identify technology to support and enhance your strategic business objectives. We’ll assist you with the design and planning, and help you set priorities for implementation.

System application and platform product selection

We lead companies through the process of selecting application software and technology vendors, allowing your management team to focus on crucial decisions.

Implementation

We lead critical technology and systems implementation projects. Working with your management team, Jones & Roth will identify key milestones, develop task plans, build timelines, and fully implement the project.

Operational and security policies

Develop operations and security policies to meet your needs. We’ll help you determine comprehensive standards for your company for antivirus and intrusion protection.

Ongoing support and remote administration

After the project is done, we provide continued system support, software/hardware upgrades, and network administration through cost effective remote access or on-site support. We provide the certified skilled engineers so you don’t have to.

Business Technology Team


Thomas Germaine, MCITP EA, MCSE/MCSA 2003

Thomas Germaine, MCITP EA, MCSE/MCSA 2003

IT Manager

Bio

Connie McMahan, MCSE

Connie McMahan, MCSE

Software & Database Manager

Charles Freeman

Charles Freeman

Information Services Technician


Recent News

Business Valuation Part 3: The Income Approach

Business Valuation Part 3: The Income Approach

This post is part of a 4-part series covering business valuation and providing guideline information on the process of valuing a business. To start at the beginning and learn what business valuation is and why a business valuation is needed, read Part 1: Levels of Value. For an in-depth look at the first valuation approach, read Part 2: The Asset Approach.

Part 3: The Income Approach

This income approach considers the expected periodic cash return that could be derived from an ownership interest in the equity of a company.  The periodic cash flow stream can be developed in two ways: based on a discrete cash flow period then capitalizing the cash flow of the final period to value the cash flows beyond the projected period or directly capitalizing a level of normalized cash flow.

To apply this model, we determine cash flows available to the equity investor, or as debt free cash flow.  Cash flows available to equity investors are used if we wish to directly value equity, whereas debt free cash flows are used if we intend on valuing total invested capital or total enterprise value, because this is the cash pool from which interest and dividends or distributions could be paid to all invested capital holders.  Formulas to calculate free cash flow to equity holders and free cash flow to all invested capital holders are shown below:

 

Free Cash Flow to Equity Holders

Net Income

+   Depreciation & Amortization

–    Capital Expenditures

–    Increase in Working Capital

+   Increase in Interest-Bearing Debt

Free Cash Flow to Equity Holders

 

Free Cash Flow to Invested Capital Holders

Net Income

+   Depreciation & Amortization

–    Capital Expenditures

–    Increase in Working Capital

+   Interest Expense, net of Taxes

Free Cash Flow to Invested Capital Holders

 

If we value cash flow to equity investors, the capitalization rate is developed by referencing the required rate of return of the equity holders, adjusted for anticipated constant growth in these cash flows.  If we value cash flow to invested capital holders, the capitalization rate is based on the weighted average cost of capital (WACC), adjusted for anticipated constant growth in these dividends.  The capitalization rate, based on WACC, is developed by weighting the rate required for equity capital with the rate required for debt capital, arriving at a blended rate, based on the amount of debt and the amount of equity associated with the total invested capital.

The model where we look at a stream of cash flows over a forecast period is known as the discounted cash flow model (DCF). DCF analysis approaches value on the basis of future return flows over an investment horizon. It attempts to estimate the present value of future investment return, based on anticipated future performance and perceived risk. To use the DCF methodology, a forecast prepared by management or the valuation analyst is needed. Beyond the end of the forecast period, it is assumed the company will continue to operate and we capitalize an ongoing level of cash flow to determine the company’s value beyond the forecast period which is often referred to as the terminal value.

Alternatively, we can determine the value of a company based on a normalized level of cash flow. A normalized level of cash flow removes the impact of unusual income and expense items which are not expected to be ongoing sources of income or expenses. In addition, in some years, capital expenditures or working capital needs can be very high, then decline to low levels for a number of years. Normalized cash flow will take into account the lumpy nature of those items and smooth those cash flows. Once we have determined a normalized level of ongoing cash flow, we can capitalize that level of cash flow at a rate that takes into account the risks of achieving those cash flows and factors in ongoing growth in those cash flows.

In both of these models, we begin with either cash flows available to the equity investor, or debt free cash flows.  Cash flows available to equity investors are used if we wish to directly value equity whereas debt free cash flows are used if we intend on valuing total invested capital or total enterprise value, because this is the cash pool from which dividends or distributions could be paid to all invested capital holders.  If we value cash flow to equity investors, the capitalization rate is developed by referencing the required rate of return of the equity holders, adjusted for anticipated constant growth in these cash flows.  If we value cash flow to invested capital holders, the capitalization rate is based on the weighted average cost of capital (WACC), adjusted for anticipated constant growth in these cash flows.  The capitalization rate, based on WACC, is developed by weighting the rate required for equity capital with the rate required for debt capital, arriving at a blended rate, based on the amount of debt and the amount of equity associated with the total invested capital.

Upcoming Blog Posts

The remainder of this series will continue to give an overview of the different valuation methodologies. Links to the other blog posts in this series are below:

Part 1: Levels of value
Part 2: The Asset Approach
Part 3: The Income Approach
Part 4: The Market Approach

 

Business Appraiser

Jason Bolt  leads the Business Valuation Team at Jones & Roth. He is an active writer and speaker on specialized business valuation topics.

Business Valuation Part 2: Asset Approach

Business Valuation Part 2: Asset Approach

This post is part of a 4-part series covering business valuation and providing guideline information on the process of valuing a business. To start at the beginning and learn what business valuation is and why a business valuation is needed, read Part 1: Levels of Value.

Part 2: The Asset Approach

The asset approach is also referred to as the adjusted net asset approach or the net asset value approach. All these names generally mean the same thing. This method is most appropriate when valuing a holding company (an entity holding various investment assets such as real estate and/or securities) or when valuing a marginally profitable company.  Companies such as those are valued based on their underlying asset values.

The asset values are adjusted to their fair market values and the sum of the adjusted asset values is reduced by outstanding liabilities to determine the net asset value (or equity value).  This is basically a modified liquidation value approach (true liquidation value would include liquidation expenses) and generally yields a floor value for a controlling interest.

The following simplified example below illustrates the steps involved in using the asset approach. In this example, the company has assets with a book value of $500,000 and liabilities with a book value of $450,000. Typically, current assets (such as cash, accounts receivable and prepaid expenses) are assumed to be equal to their fair market value. It is also generally assumed that the book value of inventory is equal to its fair market value, however, this may not always be the case if there is stale or obsolete inventory still sitting on the books.

In this example, the company owns a building with a book value of $250,000. The book value of real estate equals its fair market value only by coincidence since the book value of real estate represents the depreciated value. When valuing a business using the asset approach the valuation analysts rely on outside third party appraisals for most fixed assets. In this example, the fair market value of the real estate is $1 million, so the book value of the real estate adjusted upward by $750,000.

Typically the book value of current and long-term liabilities represent the fair market value of those liabilities. However, this is not always the case and the valuation analyst needs to review and analyze the company’s liabilities to determine whether any adjustment is necessary.

Incorporating the adjustment, the net asset value of this company is $800,000 as shown in this example (click to view PDF).

A major assumption of this approach is that the owner of the subject interest has control over the assets and would be able to liquidate them at their discretion.  An owner of the subject interest who does not have control could not reasonably expect to realize the value of the underlying assets until sometime in the future.

If the subject interest is a controlling interest in the business, the asset approach may be a useful approach since the owner of the subject interest can liquidate the assets of the company. However, if we are valuing a minority interest, we would need to incorporate a discount for lack of control (DLOC) and a discount for lack of marketability (DLOM) to determine the minority interest value. Since there are multiple discounts necessary, when valuing a minority interest, the income approach and market approach may be more appropriate.

 

Upcoming Blog Posts

The remainder of this series will continue to give an overview of the different valuation methodologies. Links to the other blog posts in this series are below:

Part 1: Levels of value
Part 2: The Asset Approach
Part 3: The Income Approach
Part 4: The Market Approach

 

Business Appraiser

Jason Bolt  leads the Business Valuation Team at Jones & Roth. He is an active writer and speaker on specialized business valuation topics.

3rd Annual ABC Craft Championships

3rd Annual ABC Craft Championships

Every year the Associated Builders and Contractors, Inc. (ABC) hosts a local Craft Championship Competition where 3rd and 4th year apprentices in HVAC and Sheet Metal programs compete to win an all-expense paid trip to compete in the ABC National Craft championship.

The event is attended by students throughout the area where they’re able to watch the competition go down, play games and do activities at the various booths, take a ride in a scissor lift, and meet representatives from local construction companies.

The event is open to the public and lunch will be served between 11am – 1pm.  Please come join us for an afternoon of construction fun and workforce development.

2017 ABC Craft Championship
October 20, 2017
8:00 a.m. – 3:00 p.m.
2201 NE Columbia Blvd.
Portland, OR 97211

The Craft Championship was born out of a desire to promote early workforce development for the construction industry, made all the more urgent by the labor shortage.

ABC is currently looking for sponsors, volunteers, and/or those willing to host a booth at the event.  Contact Laurie Kendall at lkendall@abcpnw.org or 503-726-5440 for details.

 

The 2017 competitors are as follows:

HVAC Competitors

Skyler Benoit
Wendel Beachey
Scott Kirk
Cameron Church
Brady Petersen
Hunter Davisson
Bull Mountain
Pro Temp Associates
Reitmeier
Specialty Heating & Cooling


Sheet Metal Competitors
 

Chris Neffendorf
Gilberto Soto
Elijah Rodden
HVAC, Inc.
American Heating
HVAC, Inc.