The Myth:Valuation is simple math — just plug in the numbers. The Reality:While valuation relies on financial modeling, it also requires judgment, analysis, and experience. Risk adjustments, market dynamics, and normalization aren’t captured by a basic spreadsheet. Why It Matters:Undervaluing or overvaluing a business by relying solely on formulas exposes lenders, buyers, and sellers to … Continue reading 📚 Valuation Myth: Valuation Is Just a Formula
business valuation
📚 Valuation Myth: Book Value Equals Market Value
The Myth:If the balance sheet looks strong, the business must be valuable. The Reality:Book value reflects historical costs, not economic value. A company with strong book assets but poor profitability could be worth much less than its recorded net assets. Why It Matters:Relying solely on book value ignores the critical driver of business worth: future … Continue reading 📚 Valuation Myth: Book Value Equals Market Value
📚 Valuation Myth: You Can Just Average the Three Approaches
The Myth:Use the income, market, and asset approaches — then simply average them. The Reality:Different approaches carry different relevance depending on the company’s circumstances. Weighing them equally can misrepresent the most accurate indicator of value. Why It Matters:Incorrect weighting can mislead SBA lenders, buyers, and sellers about true economic reality. Practical Tip:Reconcile approaches thoughtfully — … Continue reading 📚 Valuation Myth: You Can Just Average the Three Approaches
📚 Valuation Myth: Strategic Buyers Set Fair Market Value
The Myth:If a strategic buyer is willing to pay more, that sets fair market value. The Reality:Fair Market Value (FMV) is based on a hypothetical financial buyer — not a synergistic or strategic buyer who sees special value others wouldn’t. Why It Matters:Confusing strategic premiums with FMV can result in misleading valuations for loans, taxes, … Continue reading 📚 Valuation Myth: Strategic Buyers Set Fair Market Value
📚 Valuation Myth: Bankability Equals Value
The Myth:If the lender approves the deal, the business must be worth the price. The Reality:Loan approval focuses on repayment ability and risk tolerances — not necessarily true economic value. Bankability doesn’t automatically confirm fair market value. Why It Matters:Confusing financing approval with valuation quality can lead to overpriced acquisitions and unsupported loans. Practical Tip:Always … Continue reading 📚 Valuation Myth: Bankability Equals Value
📚 Valuation Myth: Revenue Multiples Are Universal
The Myth:You can apply a standard revenue multiple across all industries. The Reality:Revenue multiples vary significantly depending on margins, risk, industry dynamics, and growth potential. What works in SaaS, for example, doesn’t work for manufacturing or retail. Why It Matters:Applying the wrong multiple can lead to huge valuation errors — especially in SBA lending and … Continue reading 📚 Valuation Myth: Revenue Multiples Are Universal
📚 Valuation Myth: Sellers Don’t Need Valuations
The Myth:Only buyers need a business valuation. The Reality:Sellers benefit even more from accurate valuations. A solid valuation helps set realistic expectations, improves negotiation leverage, and prepares sellers for buyer scrutiny. Why It Matters:Sellers who overestimate value often face failed deals, delayed closings, or steep price reductions. Practical Tip:Get a professional valuation before marketing your … Continue reading 📚 Valuation Myth: Sellers Don’t Need Valuations
📚 Valuation Myth: Brand Always Adds a Premium
The Myth:If you have a brand, your business is worth more. The Reality:Brand recognition only boosts value if it actually translates into cash flow. A well-known but unprofitable brand may not command any premium at all. Why It Matters:Valuations should measure brand strength by results — not reputation alone. Practical Tip:Quantify brand value based on … Continue reading 📚 Valuation Myth: Brand Always Adds a Premium
Business Valuation as a Range, Not a Point – Reconciling Reality with SBA Compliance
Business valuation is both an art and a science. While it relies on empirical data, financial models, and accepted methodologies, the final conclusion often involves professional judgment and assumptions. This gives rise to the concept of valuation as a range, a notion widely accepted in academic literature, professional standards, and practical appraisal work. However, when … Continue reading Business Valuation as a Range, Not a Point – Reconciling Reality with SBA Compliance
Why Fair Market Value Often Falls Short of the Purchase Price in SBA 7(a) Deals: 10 Reasons Every Lender Should Know
In SBA 7(a) business acquisitions, a common hurdle arises: the fair market value (FMV) in the business valuation report is lower than the agreed-upon purchase price. FMV represents what a hypothetical, willing buyer would pay for a business based on its current, verified financial performance. This gap can delay loan approvals, frustrate borrowers, and complicate … Continue reading Why Fair Market Value Often Falls Short of the Purchase Price in SBA 7(a) Deals: 10 Reasons Every Lender Should Know
Highland Global Business Valuations 