The Myth:When selling just the assets, you don’t need a full business valuation. The Reality:Even asset sales often include goodwill/intangible assets — all of which require formal valuation analysis, especially for SBA loans and tax compliance. Why It Matters:Ignoring non-tangible value can trigger tax issues, deal disputes, and underwriting gaps. Practical Tip:Evaluate total enterprise value … Continue reading đź“š Valuation Myth: Asset Sales Don’t Require Valuations
business valuations
✅ No, S-Corps Aren’t Worth More Just Because They’re S-Corps
💬 If tax status alone made a company more valuable, every C-corp would flip the switch. Here's why that's a myth — and how to value pass-throughs with accuracy. 👉 Download: 'Entity Value Shouldn’t Depend on Tax Election'
🏠Owning the Building Doesn’t Make Rent Free
When a buyer acquires both the business and the real estate, rent must be normalized. Why? Because rent represents a real economic cost—even if the seller wasn’t charging themselves. Takeaway: Use market rent, not historical self-rent. It impacts earnings, valuation, and ultimately debt service coverage. Check out our article and video on this topic!
🧠Adjusting for Owner Perks
🧾 Business owners often run perks through the company—but not all of them belong in a valuation adjustment. Let’s break it down:âś… Valid adjustments: true personal expenses (e.g., country club dues, family vacations)⚠️ Invalid: things the new owner will have to spend again (like fuel, travel for conferences, or sales bonuses) Rule of thumb? If … Continue reading 🧠Adjusting for Owner Perks
đź“š Valuation Myth: 2019 Financials Are Still Relevant Forever
The Myth:Pre-COVID numbers are the true benchmark for valuation. The Reality:Markets have shifted permanently post-2020. Buyers, lenders, and valuators prioritize current, sustainable performance over historical pre-pandemic results. Why It Matters:Using outdated financials risks overvaluing businesses that haven’t recovered or adapted. Practical Tip:Focus your valuation on proven recovery trends — not just historical highs.
🧊 Even a 100% Owner Can’t Sell Overnight
Discount for Lack of Marketability (DLOM) isn’t just for minority interests. Even if you own the whole business, you can’t cash out tomorrow. That illiquidity matters—and it’s why DLOMs are justified even for controlling stakes. Takeaway for SBA lenders: The DLOM reflects real economic friction. It’s not about control—it’s about marketability. Check out our article … Continue reading 🧊 Even a 100% Owner Can’t Sell Overnight
đźš© Red Flag Story: Equipment Obsolescence
đźšś A manufacturer had solid cash flow—but we discovered most equipment was outdated, barely functioning, and not included in CapEx forecasts. Without reinvestment, operations would stall. With proper CapEx? Cash flow dropped by $110K/year. The fix:âś… Calculated Maintenance CapEx and Normalized Free Cash Flowâś… Lender adjusted loan terms Always ask: Will this business stay functional … Continue reading đźš© Red Flag Story: Equipment Obsolescence
📚 Valuation Myth: CapEx Doesn’t Matter in Valuation
The Myth:Maintenance capital expenditures don’t affect value. The Reality:Ignoring CapEx inflates free cash flow and overstates value. Every business has recurring investment needs — whether it's equipment, vehicles, or tech infrastructure. Why It Matters:Failing to account for CapEx misleads buyers and lenders about long-term sustainability. Practical Tip:Always subtract normalized CapEx from cash flow.
📉 Low Risk? Low Return. High Risk? Better Be Worth It.
Every valuation is a risk-adjusted exercise. The greater the risk, the higher the return an investor will require—and the lower the value today. This principle is baked into every SBA 7(a) valuation through the discount or cap rate. Takeaway: Risk is the price of opportunity. It should never be ignored or “smoothed out” in small … Continue reading 📉 Low Risk? Low Return. High Risk? Better Be Worth It.
🧠FMV ≠10x EBITDA
📢 Just because a company sold for 10x EBITDA doesn’t mean your deal should be valued that way. Market comps are helpful—but only when adjusted for: Size Industry Risk Terms Liquidity SBA lenders need fair market value—not headline multiples.
Highland Global Business Valuations 