Quick Start

If you understand valuation fundamentals, follow these steps to get started quickly.
1

Set Up

Download and open the Excel model. All key inputs are clearly defined.

2

Input Assumptions

Enter growth rate (g), return on new invested capital (RONIC), and WACC.

3

Review Output

Review the implied EBITDA valuation multiple.

4

Iterate

Adjust assumptions to test strategic scenarios and tradeoffs.

Getting Started

Complete these steps before relying on the output for month-end close or reporting.
  • Download and open the Excel model
  • No macros or VBA required
  • All input cells are clearly labeled

The model is designed for transparency and scenario testing.

The valuation multiple is driven by three core inputs:

1. Growth Rate (g)

  • Expected annual EBITDA growth
  • Can include organic and inorganic initiatives
  • Higher growth generally increases valuation multiples

2. Return on New Invested Capital (RONIC)

  • Expected return on incremental capital investments
  • Often a blend of project IRRs, margin expansion, or cost savings
  • Higher RONIC indicates stronger value creation

3. Weighted Average Cost of Capital (WACC)

  • Company’s blended cost of equity and debt
  • Lower WACC increases valuation multiples
  • Use the Operator WACC Tool if needed

How It Works

This section explains the underlying logic for audit support and validation.

The model expresses the EBITDA valuation multiple as a function of:

  • Growth rate (g)
  • Return on new invested capital (RONIC)
  • Weighted average cost of capital (WACC)

Key intuition:

  • When RONIC exceeds g, value creation is sustainable
  • As g approaches WACC, valuation multiples expand rapidly
  • High multiples without strong RONIC can signal overvaluation

This framework mirrors institutional valuation logic used in private equity and corporate finance.

Best Practices

  • Model your current state before testing improvements
  • Use realistic targets for g, RONIC, and WACC over a 3–5 year horizon
  • Pair outputs with internal ROIC or DCF analysis
  • Use RONIC as a capital allocation hurdle rate
  • Align assumptions with CAPM-based expectations

This tool is most powerful when used for strategy alignment, not just valuation math.

Strategic Levers

Strategic Levers to Increase EBITDA Multiple

  • Organic growth: product development, market expansion, pricing
  • Inorganic growth: acquisitions, new markets, new product lines
  • Operational efficiency and margin expansion
  • Capital discipline and project prioritization
  • Focus on high-return initiatives
  • Optimize capital structure
  • Refinance high-cost debt
  • Improve credit profile and financial performance

Developing the Strategy

  • Assess current g, RONIC, and WACC
  • Identify key constraints

Define realistic improvement targets over the next five years

  • Growth initiatives
  • RONIC improvement initiatives
  • WACC optimization initiatives
  • Review progress regularly
  • Adjust strategy based on performance and external factors

Support & Next Steps

If something isn’t working as expected, review the items below before reaching out.

If you experience issues:

Still need help? Email support@automatedaf.ai and include a screenshot of the issue.