Here is one of the less glamorous truths in valuation: If the deal only works before adjusting owner compensation and rent to market levels, there is a good chance it does not really work. Yet this is where many transactions start getting defensive. Because once you normalize those two items, a lot of attractive earnings … Continue reading If the Deal Only Works Before Market Rent and Market Compensation, It Probably Does Not Work

There is nothing wrong with optimism. Deals require optimism. Buying a business without optimism would be almost impossible. But one of the quiet truths is that the most dangerous person in many transactions is not the pessimist, not the critic, and not the appraiser. It is the optimist who has convinced himself he is being … Continue reading The Most Dangerous Person in a Deal Is Not the Skeptic. It Is the Optimist Who Thinks He Is Objective.

Sometimes what people call “market price” is just a number that survived because nobody wanted to challenge it hard enough. That may sound harsh. But I have seen deals where the purchase price was defended with great confidence and very little discipline. The seller wanted it.The buyer accepted it.The broker supported it.The lender was moving.And … Continue reading Sometimes “Market Price” Just Means Several People Agreed to Ignore the Same Risk

One of the quiet truths of this profession is that the valuation is often blamed for saying out loud what several people in the deal already suspected. That is part of the job. By the time the report is delivered, there is often disappointment, frustration, or resistance if the number does not support the structure … Continue reading The Valuation Is Often Blamed for Saying Out Loud What Several People Already Suspected

There is a moment in some transactions when the tone changes. It usually happens when someone asks a version of this question: What is this business worth without the seller in it? That is when the room often gets quieter. Because everyone knows that is not a casual question. It goes to the heart of … Continue reading The Room Gets Quiet When Someone Asks What the Business Is Worth Without the Seller

This is one of the quiet truths lenders already know, but not everyone else does: A good business is not automatically a good loan. A company may be respectable. Profitable. Longstanding. Well liked in the community. All of that can be true. And yet the transaction may still be too aggressive. The price may be … Continue reading A Good Business Is Not Automatically a Good Loan

One of the quiet truths in valuation is that some deals are priced as though risk were a technicality. As though it is something to mention, but not really something to weigh. The business has customer concentration. But the customers are “loyal.” The owner is central to operations. But the team will “step up.” Margins … Continue reading Some Deals Are Priced as if Risk Were Optional

Here is one of the quieter truths in a transaction: The seller is not the only one selling the deal. By the time some engagements reach the valuation stage, the transaction already has multiple salespeople. The seller is selling the history.The broker is selling the opportunity.The buyer is selling his capability.Sometimes even the lender is … Continue reading The Seller Is Not the Only One Selling the Deal

One of the quiet truths in small business valuation is this: Add-backs are often where discipline goes to get negotiated. Not always. Some add-backs are legitimate. Necessary, even. But this is the area where otherwise serious people can start getting remarkably creative. A recurring expense becomes “one-time.”A personal expense becomes “obviously discretionary.”A weak year becomes … Continue reading Add-Backs Are Where Discipline Goes to Get Negotiated

Let me say something carefully. Brokers are not the problem. Good brokers create markets. They create access. They create movement. They help transactions happen. That matters. But one of the quiet truths is that momentum itself can become the problem. Once a deal gets moving, every participant starts inheriting a psychological stake in continuation. The … Continue reading Brokers Are Not the Problem, But Momentum Can Be