🧯 Deadly Sin: Ignoring Working Capital Too many appraisals focus only on earnings—and forget to analyze what’s being delivered. Working capital = the fuel that keeps the business running. If the seller walks with all the receivables and payables?The buyer might be walking into a cash trap. 📌 SBA valuations must consider working capital structure—and … Continue reading 🧠 Sin Spotlight: Working Capital Ignored

📘 We created an Owner Comp Normalization Guide with benchmarks and red flag scenarios. It includes: ✅ Where to find comp data✅ How to normalize for passive vs. active owners✅ Valuation report examples✅ A checklist for appraisers and underwriters Click here to grab your copy.

💼 A seller was taking a $30K draw and claiming $180K in “cash flow.” But they were the full-time operator—sales, ops, admin, everything. Market comp for a GM in that role: $105K Real free cash flow: ~$75KReal value: about 60% of the asking price. Lesson: If you don’t normalize the salary, you’re not valuing a … Continue reading 📊 Case Study: Overstated Cash Flow via Owner Draw

🧯 Deadly Sin: Not Adjusting Owner Compensation If the valuation doesn’t reflect what the buyer would have to pay competent management, it’s wrong. We adjust to: Market-based replacement salary Industry comp data Buyer skill set, not seller tax strategy 📌 If an owner pays themselves $20K but would need to hire a GM at $95K, … Continue reading 🧠 Sin Spotlight: Owner Salary Missed

📘 New for SBA lenders:Our Rules of Thumb Red Flag Guide highlights the valuation shortcuts that don’t hold up in underwriting. Inside: ✅ When rules of thumb work🚫 When they’re dangerous📉 How to spot unjustified multiples📝 A checklist for reviewing rule-based appraisals 📩 Want the 1-page guide? Click here.

💬 “I heard these sell for 3x.” That’s what the broker said when the buyer offered $1.5M for a small commercial cleaning company. But they didn’t: Normalize free cash flow Adjust for customer concentration Account for the aging fleet Our valuation? $975K. The deal almost blew up—but the buyer got a safer price, and the … Continue reading 📊 Case Study: The Danger of “3x” Thinking

🧯 Deadly Sin: Misusing Rules of Thumb “3x earnings” is not a valuation.“4x SDE” doesn’t make it true.Even “1x revenue” is dangerous without real analysis. 🔍 Rules of thumb are starting points, not conclusions. Real valuations account for: Normalized free cash flow Working capital needs CapEx requirements Risk-adjusted discount rates 📌 If the math ends … Continue reading 🧠 Sin Spotlight: Rules of Thumb ≠ Valuation

🧾 New for SBA lenders: Our FMV vs. Strategic Value Cheat Sheet Inside:✅ Definitions and SBA SOP tie-in✅ Common examples of each✅ Red flags in strategic-heavy valuations✅ How to explain this to buyers and brokers It’s a quick-glance guide your underwriting team can use on any appraisal review. 📩 Want a copy? Click here.

📉 A lender sent us a $3.2M valuation for review. But something didn’t add up… The “valuation” assumed: A competitor buyer would gain route efficiency Back-office synergies would reduce overhead $600K in purchase premium based on “growth potential” But the buyer was new to the industry—with none of those synergies. ✅ Our fair market value … Continue reading 📊 Case Study: Strategic Value Trap

🧯 Deadly Sin: Using the Wrong Standard of Value If a valuation is based on strategic value instead of fair market value, the lender isn’t underwriting the business—they’re underwriting the buyer’s motives. Fair market value assumes: ✅ A hypothetical buyer✅ No special advantages✅ A willing seller in an open market Strategic value assumes: 💰 Synergies🚀 … Continue reading 🧠 Sin Spotlight: Wrong Standard of Value