We reviewed a $1.7M business valuation of a manufacturing firm based on smooth cash flow. But then we asked: Who are the customers? How much of revenue comes from the top one? Answer: 72% 😳 We applied a risk discount. Value dropped ~30%. Buyer and lender restructured. Deal closed—with protection. 📌 If one customer leaves … Continue reading 📊 Case Study: 1 Customer = 72% of Revenue
buying a business
🧠 Sin Spotlight: The 1-Customer Problem
🧯 Deadly Sin: Ignoring Customer Concentration Risk If one client makes up 30%+ of revenue, your cash flow has a single point of failure. Yet appraisals often: ❌ Ignore this risk❌ Apply normal multiples❌ Assume “it’ll be fine” 📌 Appraisers and SBA lenders must adjust value—or structure around it—when concentration threatens stability.
The Impact of Key Person Loss on Business Valuation in the SBA Loan Context
The sudden death or departure of a key individual—often the founder or owner—can devastate a small business’s viability and value. When operations, customer relationships, or specialized knowledge hinge on a single person, the loss can shift a business from a going concern to distress. This white paper examines the financial, operational, and valuation consequences of … Continue reading The Impact of Key Person Loss on Business Valuation in the SBA Loan Context
Why the Harmonic Mean is Best for Analyzing Financial Ratios
When analyzing business valuation multiples—such as price-to-revenue (P/R) or price-to-EBITDA—choosing the right type of average is essential to avoid misleading conclusions. While many professionals default to the arithmetic mean (a simple average), a more accurate and meaningful metric for ratios is the harmonic mean. This article explains why, using real-world examples and straightforward explanations for … Continue reading Why the Harmonic Mean is Best for Analyzing Financial Ratios
🎁 Resource Drop: Franchise Valuation Checklist
📘 We created a Franchise Valuation Checklist for SBA lenders and analysts. Includes: ✅ Common franchise-specific red flags✅ Required adjustments✅ Royalty treatment✅ Risk factors 📩 Click here to grab your copy.
📊 Case Study: The Royalty Black Hole
🍕 A franchise showed $180K in free cash flow. But the financials didn’t include: 8% royalty 3% marketing fee Real FCF? ~$100KBuyer was overpaying—lender got nervous—deal barely closed. Don’t let brand strength blind you to contract risk.
🧠 Sin Spotlight: The Franchise Valuation Trap
🍔 Not all franchise deals are created equal. We’ve seen appraisals that: Apply generic multiples without royalties Ignore franchisor contract risks Overstate goodwill based on brand alone 📌 SBA-compliant appraisals must adjust for: ✅ Royalties✅ Franchise fees✅ Transfer restrictions✅ Control limitations The brand has value—but the buyer’s control of that value can be limited. And … Continue reading 🧠 Sin Spotlight: The Franchise Valuation Trap
🎁 Resource Drop: Job vs Business Checklist
📋 We built a Job vs. Business Checklist to help SBA lenders separate sustainable enterprises from solo hustles. ✅ Key operating questions✅ Transferability test✅ Red flags for owner reliance✅ SBA loan implications 📩 Click here to grab your copy.
📊 Case Study: One-Person HVAC Biz
🛠️ $175K in “cash flow.” Looked great—until we realized: No techs No admin Owner did sales, bids, service, collections Market comp to replace the owner: $85K+True FCF: ~$90KValuation fell apart. 📌 If you remove the owner and the business collapses—it’s not a transferable enterprise.
🧠 Sin Spotlight: Valuing a Job, Not a Business
🧯 Deadly Sin: Valuing a Job, Not a Business If the business: 👤 Requires the owner to do everything or the vast majority of work📈 Has no systems, employees, or scale❌ Has no transferable goodwill... …it’s not a business. It’s a job with risk. 📌 We see this most in professional services, owner-operated trades, and … Continue reading 🧠 Sin Spotlight: Valuing a Job, Not a Business
Highland Global Business Valuations 