The Myth:If the balance sheet shows goodwill, the company must be worth more. The Reality:Goodwill on the balance sheet is often a plug from prior transactions — not an independently verified or updated measure of value. It doesn’t guarantee current goodwill exists or that it’s monetizable. Why It Matters:Relying on outdated or accounting-based goodwill rather … Continue reading 📚 Valuation Myth: Goodwill Means Higher Value

The Myth:Accrual-based net income shows the company’s cash-generating ability. The Reality:Accrual accounting records revenue when earned and expenses when incurred, not necessarily when cash moves. A business can show strong accrual profits while suffering from cash shortages due to unpaid receivables, rising payables, or heavy CapEx needs. Why It Matters:Valuation relies on sustainable free cash … Continue reading 📚 Valuation Myth: Accrual Profit = Cash Flow

The Myth:If my CPA says it’s worth $X, that’s all I need. The Reality:While CPAs are excellent at accounting, business valuation requires specialized training, professional standards, and experience in applying appraisal methodologies. Not all CPAs are qualified to perform formal, credible valuations. Why It Matters:Relying on an unsupported CPA estimate could lead to regulatory issues, … Continue reading 📚 Valuation Myth: CPA = Business Valuation Expert

The Myth:The business is more valuable because the owner is essential. The Reality:Actually, the more dependent a business is on a single owner, the less transferable — and therefore the less valuable — it becomes. Buyers seek sustainable operations without heavy reliance on one person. Why It Matters:Owner-centric businesses are riskier and command lower multiples, … Continue reading 📚 Valuation Myth: Owner Dependency Isn’t a Big Deal

The Myth:A business with high revenue is automatically valuable. The Reality:Top-line revenue means little if margins are thin, expenses are high, or the business consistently burns cash. Buyers and appraisers focus on free cash flow — the true economic benefit. Why It Matters:Focusing solely on revenue can lead to wildly inflated expectations or pricing errors. … Continue reading 📚 Valuation Myth: Higher Revenue = Higher Value

The Myth:If the business has debt, it must be worth less. The Reality:Enterprise value reflects the total value of the business’s operations — debt and equity combined. Existing debt doesn’t reduce value; it affects how value is divided between lenders and owners. Why It Matters:Confusing debt’s impact on equity with business worth can lead to … Continue reading 📚 Valuation Myth: Debt Automatically Destroys Value

The Myth:Fast-growing businesses are automatically worth more. The Reality:Growth Without Profit = Burn Rate. Growth without profitability is just burning cash faster. Buyers and appraisers look for profitable and sustainable growth — not just high top-line expansion. Why It Matters:Unprofitable growth can lead to funding shortfalls, increased risk, and valuation discounts. Practical Tip:Focus on growing … Continue reading 📚 Valuation Myth: Higher Growth = Higher Value

The Myth:If the SBA accepted the valuation, it must be accurate. The Reality:SBA loan approval primarily ensures that minimum standards are met — not that the valuation is free from errors or aggressive assumptions. Compliance doesn’t always equal credibility. Why It Matters:Lenders and buyers who rely blindly on “approved” valuations can expose themselves to hidden … Continue reading 📚 Valuation Myth: SBA Approval Means the Valuation is Right

The Myth:EBITDA represents the company’s cash-generating power. The Reality:While EBITDA strips out some non-operational expenses, it ignores maintenance CapEx, working capital changes, taxes, and debt service needs. Free cash flow — not EBITDA — drives true value. Why It Matters:Relying only on EBITDA can dramatically overstate a company’s economic benefit to a buyer. Practical Tip:Always … Continue reading 📚 Valuation Myth: EBITDA Tells the Full Story

The Myth:You can apply the “industry standard” multiple and call it a day. The Reality:Multiples vary wildly based on factors like size, margins, growth, risk, customer concentration, and management strength. There’s no one-size-fits-all multiple. Why It Matters:Using a wrong or generic multiple can seriously misprice the business — risking bad investments or flawed underwriting. Practical … Continue reading 📚 Valuation Myth: Multiples Are Plug-and-Play