George Sandmann’s Post

Understand the Income Approach in a Business Valuation  What Is the Income Approach and How Is It Utilized? 5 min read: https://lnkd.in/d4sfG26p #CredenceAndCo #ValuationServices #BusinessValuation #IncomeBasedValuation #RealEstateValuation #DubaiBusiness #AbuDhabiInvestments #AssetValuation #FinancialConsulting #CashFlowAnalysis #BusinessAppraisal

How to make practical sense of an important academic concept... DCF valuations are fairly complicated. Unfortunately, this keeps them out of many management discussions in small and lower-middle market companies. This is unfortunate because they are very useful in a number of corporate finance scenarios. Normally, businesses have a number of projects they are considering at any given time. Sometimes running a business feels like having a 10,000 point "to-do" list. DCF valuations can help you ground your decision to pursue one project versus another from a return on investment standpoint. Most worthwhile projects require an investment of time and money, and it's important to try and focus on the highest ROI opportunities. Another practical use of discounting cash flows comes in business valuation in M&A transactions. If you're thinking about buying or selling a business that produces positive cash flow a major point of consideration will be what it is worth paying in today's dollars for those future expected cash flows. While precedent transactions usually dictate the valuation range of a middle-market business, DCF valuations are going to play an impactful role in determining what buyers will actively bid in a competitive auction. Sophisticated buyers (the ones who can afford to pay lots of money) will never rely on one form of valuation alone and will certainly consider value from at least three perspectives. DCF valuations are how they will assess the intrinsic value of a business (value from an income approach). However, DCF valuations are only as good as the assumptions they are based on. - How long should we forecast future cash flows for? - How does the size or scope of a business' market impact a DCF? - How should we account for a permanent absorption of the business? - How do we model for a business we intend to sell again in the future? Answers to these questions (and more) help make sense of an often overly-academic concept that has real practical value for most profitable businesses. Learn more here: https://lnkd.in/ejpgNpqg #finance #business #entrepreneurship #mergersandacquisitions #capitalraising #kimberlyadvisors

The question of Business Valuation One million, ten million, or a hundred million. What is the value of your company? The question that every business owner thinks about constantly and needs to answer when looking for funding through investments, mergers, or when being acquired. As an expert in business valuation, I can tell you for sure, the answer is not straight forward. Valuation is part art (that is negotiations) and part science (Number crunching). There is no one true value (That is until someone pays you, and therefore that amount becomes the value). Valuation is based on many external factors such as industry, market, and competition, and on internal factors such as team, vision, any unique technologies or patents, and the company’s core competencies. Then comes the finance part, where the past performance of the company (Show me your financial statements) and its growth plans for the future (Let’s do some projections) that translate a strategic direction and reflect a future that should be attractive to some investors. Key methods used in calculating value:  Multiples: Revenue, EBIT, EBITDA multiples are based on markets averages that are specific to each industry  #EarningsMultiplier Discounted Cash Flow (DCF): Projects future cash flows and adjusts them to present value, factoring in inflation, proper discount rate, and growth rates. #DCF Market Capitalization: Multiplying the share price by the number of outstanding shares provides a snapshot of market value. #MarketCap Book Value: Represents shareholders’ equity, calculated by subtracting total liabilities from total assets. This is rarely used as it does not reflect real value of the company #BookValue Liquidation Value: The net cash from selling assets and settling liabilities, useful in distressed scenarios. #LiquidationValue Business Valuation is not to be taken lightly. If you are a business owner, think about the following: Make sure you consult with a finance advisor.  Remember that after the numbers are out, you still need to negotiate. If you are looking for an investor, remember that value is not only in the cash invested, but also in the opportunities they may offer (Think institutional investors). Not every investor is suitable for your company. #BusinessValuation #Finance #Investment #Entrepreneurship #FinancialStrategy

Understanding the true value of your company is crucial. Yet, it’s often more complex than it might at first seem. As factors influencing valuation evolve and vary, it’s important to grasp how different elements—like ownership structures and intellectual property—can impact your business’s worth. Jeffrey Elder | 512-507-1245 | jelder@IBEXBeyond.com #businessbrokers #buyingabusiness #sellingabusiness #valuations #businessvaluation #businesscomplexities

Are you curious about your business's worth? At Founder M&A, we understand the importance of an accurate valuation. That's why we've developed the MAP (Market Anticipated Performance) Review. For years, we've seen competing advisory firms inflate valuations to win clients by setting unrealistic expectations. This is not our approach. Our MAP review is a thorough, data-driven process that we conduct before proposing any agreements, ensuring a transparent and honest evaluation. Here’s how our MAP review works: (At-a-glance) - We analyze the past three years of your business’s performance. (PnL, Balance Sheets) - We create an easy-to-review document to help determine your adjusted EBITDA and anticipated Enterprise Value (selling price). - While we do rely heavily on the latest comparative private market transaction data sourced from our state of the art applications. We then perform confirmatory checks via direct feedback from a selection from our extensive buyer network, those that are currently investing in your space. This lets us dial in and determine your current trade multiple. At Founder M&A, we believe in honesty, integrity, and setting correct expectations from our first interaction. If you're considering an exit or just want to understand your business's current value, reach out to us. Contact us at: Valuations@FounderMA.com For a free, no-obligation valuation. Let’s get started on your path to a successful exit! #mergersandacquisitions #smallbusinessbigdreams #businessvaluation #exitplanning #honestvaluations #entrepreneurship #businessgrowth

Valuation Approaches

Valuation: Keep It Simple, Genius! #Valuation #investing #personalfinance #investmentlesson When it comes to investing, people often get caught up in complex formulas and fancy methods to value a company. But let’s cut to the chase—**valuation is really about common sense**. Ask yourself, “How much am I willing to pay today for the future earning potential of this business?” Think Like an Owner Don’t think like a Wall Street analyst juggling spreadsheets—**think like someone who owns the business**. Would you be comfortable owning this company for the next 10, 20, or even 50 years? If the answer is yes, you’re already on the right track. A good valuation boils down to how much you would pay to own the whole business for life, not just the stock price for today. Avoid "Intellectual Plagiarism" Many analysts copy each other’s methods and tweak little details to fit a desired outcome. But you don’t need to do that. **Focus on understanding the business**. What are its growth prospects? Does it generate predictable cash flows, or is it a roller-coaster ride of uncertainty? The key here is understanding how much capital the business needs to keep running. Are most of its costs tied up in day-to-day operations, or does it need huge chunks of capital for future growth? DCF Basics: Know It, Don’t Worship It A lot of people talk about **Discounted Cash Flow (DCF)** like it’s the Holy Grail of valuation. But let’s keep it simple: if you know how DCF works, you can tell whether a price makes sense, but don’t get lost in the math. **Don’t fool yourself with over-complicated models**. The biggest mistake is thinking you need to master every technical aspect to make good decisions. Trust your instincts and the basics first. Conclusion: Keep It Real Ultimately, the best thing you can do as a retail investor is keep things simple. Understand the business, don’t overcomplicate your analysis, and always think like an owner. Trust your gut, stick to the fundamentals, and avoid the trap of over-intellectualizing everything. Valuation isn’t rocket science—it’s about making decisions that make sense to you. At ProInvestor AI, we’re building India’s first AI-powered financial terminal to help retail investors learn, grow, and make informed decisions. Our mission is to empower a generation of smarter investors and ensure that no one misses out on India’s golden future.

🔍 Understanding Valuation in Different Industries 📊 🔹Do you know how the value of businesses changes from one industry to another? 🔹🚀 It’s important to understand these differences if you’re an investor or business leader. 🔹 Consider valuing industries like tuning a musical instrument—each sector plays a different tune and requires adjustments to hit the right note. 🔹Valuation isn’t one-size-fits-all; it’s like choosing the perfect recipe for each industry—what works for tech might not work for real estate! 🔹Let’s explore these differences and see how valuing businesses changes based on their industry. 💬 What industries do you work with? How do you value them? Share your thoughts! #Valuation #Finance #Investment #Business

Valuing seed, start-up, and early-stage investments poses unique challenges due to limited financial history and uncertain future prospects. In our latest Advisory blog, we outline key valuation methods, including the Cost Approach, Market Approach, and Income Approach, each offering distinct advantages based on the company's stage and available data. Click the link below to read more. #BusinessAdvisory #Advisory #Valuation

Cracking the Code of Business Valuation! 📊💼 Business valuation is like putting a price tag on a company’s worth. Here's a glimpse into this crucial process: 1. Understanding Value Drivers: Factors like revenue growth, profitability, market position, and intellectual property influence a company’s value. 2. Valuation Methods: From the income approach (DCF), market approach (comparable company analysis), to the asset approach, each method brings unique insights into a company’s value. 3. Financial Statements’ Role: Analyzing balance sheets, income statements, and cash flow statements is key to estimating future cash flows and determining a fair value. 4. Industry and Market Trends: External factors such as industry performance, economic conditions, and market demand also impact valuation. 5. Purpose Matters: Whether for a sale, investment, merger, or legal purposes, the reason for valuation shapes the approach and outcome. Mastering business valuation empowers investors, entrepreneurs, and stakeholders to make informed decisions and unlock opportunities. 💡 #businessvaluation #investmentinsights #financialstrategy #industryinsights #mindspaceoutsourcing