GrowGrade Frequently
Asked Questions

GrowGrade is a free online tool to help business owners have better clarity into the performance and health of their business. GrowGrade includes many features, such as a completely digital business valuation, a business Health Score, industry insights specific to the business, and more. Additionally, GrowGrade provides tools for business owners to understand how different growth initiatives could impact their valuation.

There are few tools that allow business owners to track the value of their largest assets…. their business. GrowGrade provides business owners with a free, non-accredited valuation, without having to spend thousands of dollars. 

These valuations were tested against accredited valuations and with real business owners. Before spending a significant amount of money on an accredited valuation, business owners can use GrowGrade to set a baseline.

At GrowGrade, we believe in the democratization of knowledge.  That means equipping business owners with the information they need in order to more effectively manage their business. By helping businesses grow into their full potential, and by becoming a trusted partner, everyone wins. Down the road, when looking for a financial product, business owners can have confidence that GrowGrade can help.

• Planning for retirement 
• Planning to grow the business 
• Succession planning 
• Bringing on a partner 
• Selling the business 
• Divorce 
• Using the business to finance debt

• Business owners have two options for receiving a GrowGrade valuation.
  • Recommended:  Connect Quickbooks or Xero online accounting software. It must have the online version, and must have 3-5 years of historical information (P&L and Balance Sheet)
  • Manually enter financial information. If business owners do not use online accounting software, or do not feel comfortable linking online accounting software, the following information will be needed for the past 3-5 years:
    • Revenue 
    • Cost of Goods Sold 
    • Expense 
    • Owner’s Compensation 
    • Depreciation 
    • Amortization 
    • Cash and Cash Equivalents 
    • Long-term Debt

GrowGrade uses a discounted cash flow model to project the value of a small business. First, GrowGrade leverages historical financial information to calculate an average growth rate. That growth rate is then applied to future free cash flows. To account for risk, the GrowGrade calculation takes the net present value of three years’ future-free cash flows. The net present value of future free cash flows, plus cash and cash equivalents, minus long-term debt provides the GrowGrade value.

No. Free Cash Flow is EBIT minus taxes, plus certain variables such as depreciation, amortization, and owner’s compensation. It is very important that the business owners provide a “total” compensation. This should include all expenses that they expense to the business. Vehicles they drive, meals, cell phone, and other expenses would want to be included in Owners Compensation.

Scenario Modeling allows a business owner to test their valuation under different scenarios. Projected fields for: Revenue, Cost of Goods Sold, Expense, Owner’s Compensation, Cash and Cash Equivalents, and Long-term debt are all editable fields.  Business owners can adjust these fields and hit “Run Scenario” to see how different outcomes would impact their valuation. 

For instance, if a business owner is thinking about expanding the business through debt, the owner could increase the long-term debt field, and make the appropriate adjustments for Revenue, and/or Expense.

GrowGrade has been tested with hundreds of small business owners and has proven to be highly accurate. If the business owner disagrees with their valuation, start by reviewing the historical information on the main dashboard. Does the information match what they typed in during manual entry? Is the data pulled from Quickbooks inaccurate?

• If manual data entry is incorrect: edit the historical data from the profile section of the application
• If accounting software data is incorrect:  consult your accountant or manually update in the accounting platform.  

If a business owner is confident in the data used and believes the valuation is incorrect:

• Leverage scenario modeling to more accurately reflect your growth expectations for the business. 
• Email help@growgrade.com with an explanation of the discrepancy.  GrowGrade is constantly evolving and improving; all feedback will be used to continue to make GrowGrade the best valuation platform.