Using the Capitalized Excess Earnings method in your business valuation? Then you might run into a scenario where your analysis produces negative goodwill. Good news: it usually points to issues with the input assumptions rather than the true economic value of the business. Follow these steps to identify and correct the problem: Check earnings adjustments… Continue Reading
Ask any financial analyst what tool they can’t live without. There’s a good chance their answer will be the same: Excel. Sure, technology has advanced. We have powerful Business Intelligence platforms, cloud accounting systems, and automation tools that promise to take us beyond spreadsheets. And yet, when it comes down to day-to-day analysis, Excel still… Continue Reading
Business people use forecasting models regularly, especially for creating pro-forma financial statements and operating budgets. Two common types are sales based models and linear regression forecasting with independent line-item projection. Each has distinct benefits and limitations that make it suitable for specific situations. Sales-Driven Forecasting Models To use a sales based model you first forecast… Continue Reading
In recent years, the rise of automated valuation platforms and templated financial tools has introduced a new breed of appraisal deliverables. They are often accompanied by bold marketing claims like “25+ valuation methods supported”. On its surface, this sounds impressive. But beneath the surface, such figures often reflect a distortion of terminology more than true… Continue Reading
In the realm of venture capital, AI startups are “defying gravity” when it comes to company valuation. Despite a broader contraction in the venture investing market, these companies are raising astronomical sums at jaw-dropping valuations, often before generating any revenue, let alone showing profitability. The Unprecedented Rise AI startups are securing funding rounds that would… Continue Reading
You will find valuation multiples as ubiquitous tools used in business valuation. Professional appraisers, business owners and investors use all kinds of multiples to figure out a company’s value. Using them you can quickly compare a company to similar businesses whose values are known. Comparable business sales are a great source from which you can… Continue Reading
Let’s face it: business valuation shouldn’t require a PhD in finance or a $10,000 data subscription. Yet most tools force you to hunt down critical inputs like cost of capital or industry multiples yourself. Not anymore. With ValuAdder, all the heavy-duty data you need is baked right into the software. No guesswork. No extra fees.… Continue Reading
Can you confine yourself to just analyzing a company’s financial statements in order to figure out its value? The answer is no. Why? Because business value is revealed by both its earning capacity and risk. The higher the business earnings and the lower the company’s risk, the higher its value. On the other hand, a… Continue Reading
There is no better way to lend credibility to your business appraisal than comply with established and widely recognized standards. Two such primary standards often come into play: Revenue Ruling 59-60 and the Uniform Standards of Professional Appraisal Practice (USPAP). Both of these standards are crucial in their respective domains, yet they serve different purposes… Continue Reading
In business valuation, two methods stand out: Capitalized Earnings and Discounted Cash Flow (DCF). Which one should you choose for your appraisal projects? Each method brings its unique perspective to the table, offering you a different way to view the value of a company. Capitalized Earnings: a snapshot of stability Capitalized Earnings is a valuation… Continue Reading
If you pick up a business appraisal report you are very likely to run across the market comparables or comps used in value analysis. In essence, the comps let you compare the target business to similar businesses that have been sold recently. While this method has its merits, relying solely on market comps can be… Continue Reading
Choosing the appropriate earnings basis for your business valuation is key. One choice made by professionals is the Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). However, like any tool, it has its pros and cons, which merit careful consideration. Pros Isn’t using the accounting EBITDA measure of income enough? Some additional points: Normalization… Continue Reading
You can use business valuation for various transactions, including mergers and acquisitions, investment decisions, and even internal assessments of the company’s value. Among the methods employed in business valuation, revenue multiples have gained popularity for their simplicity and accessibility. However, while revenue multiples can offer you quick insights, relying solely on them can lead to… Continue Reading
For a company a key measure of success is its ability to create a steady and predictable income. In other words, the business must generate desired returns for its owners given an acceptable level of risk. No other business valuation method captures this idea better than the discounted cash flow valuation method. What is Linear… Continue Reading
Creating an earnings forecast can be challenging when the current year is not yet completed, and only partial data is available. In this blog post, we will explore two methods of creating an earnings forecast with a partially completed year: using only historical data, and using proration. Method 1: Using Only Historical Data One way… Continue Reading