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
goodwill valuation
🚩 Red Flag Story: Addback Shenanigans
⚠️ A BDO brought us in to review a $1.9M acquisition. Everything looked solid… until it didn’t. The seller's addbacks included:🚗 $26K in personal car leases💼 $15K salary to the seller’s spouse📣 $48K in critical marketing (not actually discretionary)🐾 And… $2,400 in “pet care” 🐕 Once we normalized earnings correctly, the value dropped by over … Continue reading 🚩 Red Flag Story: Addback Shenanigans
📚 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
🚩 Red Flag Story: Owner Addbacks Gone Wild
A buyer was told free cash flow was $480K. Our valuation said: not even close. We found: $72K in non-repeating COVID grants $34K in a one-time legal recovery $49K in “consulting fees” that were really recurring employee costs True free cash flow? Around $325K. A $1.7M price tag suddenly looked… risky. Deals get inflated fast … Continue reading 🚩 Red Flag Story: Owner Addbacks Gone Wild
📚 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
⚙️ When You Do (and Don’t) Need an M&E Appraisal for SBA Loans
Does SBA require a machinery & equipment appraisal? Short answer: NO. Under SOP 50 10 8, SBA does not mandate an M&E appraisal in most cases. It’s typically up to the lender. In some cases, lenders may request a separate M&E appraisal if: The equipment is used and collateral value needs to be documented The … Continue reading ⚙️ When You Do (and Don’t) Need an M&E Appraisal for SBA Loans
🧠 Normalizing Owner Compensation
💰 Overpaying or underpaying the owner? Either way, the valuation will be off. Normalizing owner compensation is one of the most important steps in calculating free cash flow for SBA 7(a) deals. We use industry comp data to set a realistic salary—not what the buyer or seller wants to pull. ⚠️ Inflated salary = undervalued … Continue reading 🧠 Normalizing Owner Compensation
📚 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
✅ What the SBA Really Requires in a Business Valuation
The SBA has specific valuation requirements. Must be performed by a qualified source Must be based on supported methods Must use the fair market value standard Must be consistent with good appraisal practice Takeaway: A compliant valuation isn’t optional—it’s mission critical. Knowing the SBA's requirements inside and out is part of lending well. Check out … Continue reading ✅ What the SBA Really Requires in a Business Valuation
🚩 Red Flag Story: Family Payroll Games
🚨 Family members on payroll who don’t work there? That’s a valuation killer. We found: $38K to a retired uncle $21K to a daughter in college $12K to a spouse listed as “office admin” (but worked elsewhere full-time) These non-operating expenses distorted the true free cash flow. After cleaning them out, the value increased 22%. … Continue reading 🚩 Red Flag Story: Family Payroll Games
Highland Global Business Valuations 