Brand Value Report

Presented by: Muhammad Haseeb

Business Value = Value of EBay + Value of Website

= $724,015.51 + $113,722.49

Buyer Pays = $837,738

Introduction
This report presents the Market Value (MV) of an EBay sales account and a sales website. The business
value represents the value added by the business and the value it should be paid off to sell the business
to the other interested party.
Methodology

The method of analysis used is Discounted Cash Flow (DCF) method with multiple
growth strategies. The cash flows are predicted for future time periods and DCF
formula is used to calculate the present value of the company. Market value of the
business is used to calculate the value of Goodwill, which is more relevant to be
paid for.
Financials
1. EBay Account Valuation
Gross Sales of the year 2012 and 2013 were given and the sales of 2014 were
extrapolated by using the percentage method. Growth rates were assumed to
decrease by 5 percent every year until they reach the US GDP growth rate level of
2.60 percent1. Profit margin was assumed to be 19 percent constant for whole years
as experienced from the historical monthly profits. The results are presented in
Table 1.

Table 1
Year
2012
2013
2014
2015
2016
2017
2018

Sales
$439,925.9
1
$1,000,196
.33
$1,328,345
.00
$1,697,736
.83
$2,084,963
.88
$2,456,263
.12
$2,770,871
.76

Growth
Rate

Profit
Margin
19%

127.36%

19%

32.81%

19%

27.81%

19%

22.81%

19%

17.81%

19%

12.81%

19%

Net
Income
$83,585.9
2
$190,037.
30
$252,385.
55
$322,570.
00
$396,143.
14
$466,689.
99
$526,465.
63

1 http://www.tradingeconomics.com/united-states/gdp-growth

$2,987,233
2019
.22
$3,071,127
2020
.45
$3,150,976
2021
.76

7.81%

19%

2.81%

19%

2.60%

19%

$567,574.
31
$583,514.
21
$598,685.
58

The cash flows, as calculated by the name Net Income in the table 1 were used to
predict the market value of the brand. The discounted value of the future cash flows
was calculated at 2014 by using the 5-year average S&P 500 discount rate 2 and
then they were summed up to calculate the market value of the company. The
termination price was calculated by using the growth rate of 2.60 percent of US GDP
growth rate. It can be viewed in Table 2 below.

Table 2
Discount Rate
T

Termination Price

5-year average S&P

20% 500
CF
PVCF
210,321.2
1
252,385.55
9
224,006.9
2
322,570.00
4
229,249.5
3
396,143.14
0
225,062.6
4
466,689.99
9
211,574.7
5
526,465.63
3
190,079.4
6
567574.31
9
162,848.1
7
583514.21
1
139,235.1
8
598685.58
3
821,007.1
8
3,530,180.49
5
2,413,38
Market Value
5.04

Brand Value
2 http://quicktake.morningstar.com/index/IndexCharts.aspx?Symbol=SPX

The brand value of the EBay account is calculated by taking 30 percent of the
market value of the account. The rate is derived from the KPMG research report
deriving 34.8 percent industry average of percentage allocation of purchase price 3.
This analysis used 30 percent as a conservative measure. The brand value
becomes:
Brand Value = 0.30 * $2,413,385.04
Price to be Paid =

$724,015.51

2. Website Valuation
Gross sales of the website are provided for the year 2013 and 2014. The partial
value of the 2014 gross sales was used to identify the annual value by using the
percentage approach (2014 partial value divided by 42 percent, which is percentage
of the months passed so far). The growth rate was assumed to be half of the last
years rate until it reaches 25 percent that becomes after 5 years of company
startup. After the 5 years the growth rate was assumed to decrease by 5 percent
every year until it reaches the US GDP growth rate. The financials are presented in
the table 3 below:

Table 3
Year

Sales
$28,275.
2013
09
$97,400.
2014
38
2015 $194,800

Growth
Rate

Profit
Margin

Net
Income
19%

244.47%
100.00%

19%
19%

$5,372.27
$18,506.0
7
$37,012.1

3 http://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/Intangible-assets-andgoodwill.pdf

2016
2017
2018
2019
2020
2021
2022

.75
$292,201
.13
$365,251
.41
$438,301
.69
$504,046
.95
$554,451
.64
$582,174
.22
$597,310
.75

50.00%

19%

25.00%

19%

20.00%

19%

15.00%

19%

10.00%

19%

5.00%

19%

2.60%

19%

4
$55,518.2
1
$69,397.7
7
$83,277.3
2
$95,768.9
2
$105,345.
81
$110,613.
10
$113,489.
04

The net income numbers are used as cash flows of the year and are discounted at
the S&P rate. The termination value is calculated using the 2.60 percent growth
rate, which is the US GDP growth rate. The market price is presented in the table 4
below:

Table 4
Discount Rate

20%
T
1
2
3
4
5
6
7
8
9

Termination Price

5-year
average
S&P 500
CF
PVCF
18,506.07 15,421.73
37,012.14 25,702.88
55,518.21 32,128.60
69,397.77 33,467.29
83,277.32 33,467.29
95,768.92 32,072.82
105,345.8
1
29,400.08
110,613.1
0
25,725.07
113,489.0
4
21,994.94
669,194.0
129,694.2
1
8
Market
379,074.
Value
97

Brand Value
The brand value of the website is calculated by taking 30 percent of the market
value of the account. The rate is derived from the KPMG research report deriving
34.8 percent industry average of percentage allocation of purchase price 4. This
analysis used 30 percent as a conservative measure. The brand value becomes:
Brand Value = 0.30 * $379,074.97
Price to be Paid =

$113,722.49

Brand Value of the Company

4 http://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/Intangible-assets-andgoodwill.pdf

Business Value = Value of EBay + Value of Website

= $724,015.51 + $113,722.49
= $837,738