📘 We’ve created a Book Value vs. FMV Cheat Sheet for SBA lenders and analysts. Includes: ✅ Accounting vs. economic definitions✅ When book value is relevant✅ Red flags in asset-heavy deals 📩 Click here to grab your copy.
buying a business
📊 Case Study: The Machinery Mirage
💼 A seller claimed $950K in asset value. Book value on the balance sheet? $820K. But when we did an M&E appraisal?True FMV: ~$410K Much of the equipment was obsolete. Don’t let accounting numbers dictate real-world risk.
🧠 Sin Spotlight: Book Value ≠ Fair Market Value
🧯 A balance sheet is not a valuation. Book value may be: Depreciated Incomplete Misclassified Or totally irrelevant for going-concerns 📌 SBA-compliant appraisals should focus primarily on the income approach with support from the market approach. The asset approach has limited applicability.
Interpreting R-Squared in Business Valuation: A Cautious Approach to the Direct Market Data Method
Regression analysis in business valuation, particularly the Direct Market Data Method (DMDM), relies on R-squared (R²) values. This article examines these statistical concepts, their interpretation and their implications for SBA 7(a) valuations. The Role of R-Squared in Regression Analysis R-squared (R²) measures the proportion of variance in the dependent variable (e.g., sale price) explained by … Continue reading Interpreting R-Squared in Business Valuation: A Cautious Approach to the Direct Market Data Method
BIZCOMPS, ValuSource Market Comps, and DealStats in Business Valuation
Transaction databases are integral to the market approach in business valuation, providing empirical data on private company sales. This article examines three leading databases—BIZCOMPS, ValuSource Market Comps, and DealStats—highlighting their advantages, limitations, and implications for valuation accuracy. The report integrates commentary and research from valuation professionals and third-party sources to offer a well-rounded perspective. 1. … Continue reading BIZCOMPS, ValuSource Market Comps, and DealStats in Business Valuation
Liquor License Quotas and SBA 7(a) Lending — Navigating the Disconnect Between Market Value and Going Concern Appraisals
In states with liquor license quotas, the market value of a liquor license can significantly exceed the operating cash flow of the business holding it, creating a valuation challenge for SBA 7(a) loans. These loans prioritize the business as a going concern, focusing on cash flow rather than intangible asset premiums, often leading to a … Continue reading Liquor License Quotas and SBA 7(a) Lending — Navigating the Disconnect Between Market Value and Going Concern Appraisals
🎁 Resource Drop: Valuation Projections Risk Checklist
📘 New tool: Our Projections Risk Checklist for SBA lenders Includes: ✅ When projections are acceptable✅ Common abuses in appraisals✅ Questions for review 📩 Click here to grab your copy.
📊 Case Study: Startup-Level Projections in a Mature Business
💼 We reviewed a valuation where the buyer projected 30% growth and a 2x revenue jump post-acquisition. The valuation? Based on unsupported projections as if the company were a startup. But: Mature business in a mature industry Historic growth = 2–3% No new contracts No capital investment We valued the business based on historic free … Continue reading 📊 Case Study: Startup-Level Projections in a Mature Business
🧠 Sin Spotlight: Projections ≠ Valuation Basis
📉 Projections are a tool—generally not a justification for 7a valuations. The SBA favors valuation based on historical performance, not hypothetical growth. But we’ve seen appraisals that: Use unsupported forecasts to support value Apply multiples to “future EBITDA” Ignore risk adjustments 📌 If the value is based on what the business might do or what … Continue reading 🧠 Sin Spotlight: Projections ≠ Valuation Basis
🎁 Resource Drop: CapEx Adjustment Worksheet
🧾 We built a CapEx Adjustment Worksheet to help lenders and analysts test if CapEx has been normalized. It includes: ✅ CapEx drivers✅ Normalization considerations ✅ Common appraisal errors✅ SBA considerations for capital assets 📩 Click here to grab your copy.
Highland Global Business Valuations 