All manner of confusing euphemisms pop up in various contexts. So you shouldn’t be surprised when you hear about pre-revenue companies. Young companies in the early stages of their development sometimes want to get an appraisal. For example, business owners may need to reach out for external funding or address issues such as deferred compensation… Continue Reading
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If you own a successful business, you know how to create value. You put together the machinery and equipment you need, hire smart people, raise the money to run the operation. Then you build some exciting new products and services and hope they will come. You know, the paying customers. But let’s imagine you have… Continue Reading
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Ever wonder how valuations of small and large businesses differ from each other? To be sure, some things should be obvious. For example, a big bell weather corporation looks a lot different than a mom and pop shop around the corner. Now compare a single owner-operator professional practice to a multinational firm. A tiny private… Continue Reading
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So why do you need to estimate the cost of capital for a business? If you own a business or serve business owners as a professional advisor, you participate in the market. Why is this important? Because the market defines how every participant plays their part. Guess what part of this game is crucial to… Continue Reading
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If you take a look at public company valuations you will surely run across the multiples based on the EBITDA, EBIT and net income. But why don’t private company appraisal use these as often? The short answer: you have better choices of earnings basis to run your business valuation. Why? Because privately owned companies do… Continue Reading
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Why should you concern yourself with adjusted present value? Now you probably heard about the present value. In other words, the company’s worth in present day dollars. You create a forecast of business earnings, build up your discount rate, and crunch the numbers. And the discounted cash flow valuation spits our your present value number.… Continue Reading
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At some point in your business life you will likely run across a business valuation report. It may look like a brief opinion of value or a detailed work product which leaves no stone unturned. Some points to consider when reading a business valuation report. Read the report before jumping to the business value conclusion… Continue Reading
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Capitalized earnings valuation method pops up all the time in appraisals of just about any income producing asset – commercial real estate, businesses, or any other valuable asset. What makes the capitalized earnings method so popular? So what makes this valuation method so popular? In short, simplicity and wide acceptance by the valuation professionals, courts,… Continue Reading
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What does unlevering the beta for a company buy you? If you open any textbook on corporate finance, you will quickly run across the capital asset pricing model or CAPM. Experts use the CAPM in order to figure out business risk. More formally, the model lets you estimate the important discount rate. And that you… Continue Reading
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What is the role of net cash flow in business valuation? Just talk to a seasoned investor who puts money into public company stock. And you will surely hear about various valuation multiples they use to figure out the value. Ratios of price to earnings, EBITDA, gross revenue or net sales are common knowledge. What… Continue Reading
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