📉 A deal came in at a $3.5M price tag based on a broker "valuation." Their logic? “Because similar businesses sell for 5x.” But: No normalized cash flow No working capital terms No review of recurring CapEx We valued it at $2.1M. The lender restructured the deal. Buyer still closed—safely. Brokers sell optimism. Lenders need … Continue reading 🚩 Red Flag Story: Broker-Driven Valuation
How To Value A Business
🧠 Business Valuation vs. Real Estate Appraisal
🏢 Real estate appraisals follow rules. Business valuations require judgment. That’s why: FMV (fair market value) for a building can be +/- 2% FMV for a business might swing 20–30% depending on assumptions Appraisers must justify every step. But subjectivity is built into valuation—because businesses are messy. SBA lenders need to understand both sides of … Continue reading 🧠 Business Valuation vs. Real Estate Appraisal
📚 Valuation Myth: A Business Appraisal = Equipment Appraisal
The Myth:A business appraisal is the same thing as an equipment or asset appraisal. The Reality:Business valuations analyze total enterprise (or equity) value — including goodwill, cash flow, risk, and intangibles — while asset appraisals focus on the resale value of physical equipment. Why It Matters:Confusing the two can result in incomplete collateral analysis or … Continue reading 📚 Valuation Myth: A Business Appraisal = Equipment Appraisal
When Bigger Multiples Mislead: A Guide for SBA Lenders
Mainstream headlines and investment pitches frequently highlight multiples from public companies, private equity-backed platforms, or high-growth sectors like SaaS, where enterprise-scale premiums and optimistic growth projections push EV/revenue multiples into the 5–8× range and EV/EBITDA to 8–15× or higher. For instance, the S&P 500's average EV/EBITDA often hovers around 10–16×, reflecting benefits from low risk, … Continue reading When Bigger Multiples Mislead: A Guide for SBA Lenders
💸 Why the Same Business Can Have Two Different Values
Confused clients often ask: “Why did the valuation change? It’s the same company!” Here’s why: it’s not about the business—it’s about the deal structure. A stock purchase is riskier for the buyer than an asset purchase with leverage. That means a higher required return—and a lower equity valuation. Backed by Nobel-winning theory from Modigliani & … Continue reading 💸 Why the Same Business Can Have Two Different Values
📚 Valuation Myth: Projections Don’t Need Support
The Myth:Future projections are enough to justify value — no need to back them up. The Reality:Projections without clear support are just optimistic guesses. Buyers and SBA lenders need evidence — like written plans, assumptions, customer contracts, and operating history — to trust future performance claims. Why It Matters:Relying on unsupported projections can inflate value … Continue reading 📚 Valuation Myth: Projections Don’t Need Support
🎁 Resource Drop: Addback Risk Review Tool
📘 We created an Addback Review Tool to help SBA lenders validate free cash flow adjustments. Includes: ✅ What counts as legitimate✅ Addback audit checklist✅ Review questions 📩 Click here to grab your copy.
📊 Case Study: “Adjusted” to Death
Seller showed $450K in cash flow after $160K in adjustments. Problem: $36K was “one-time” marketing (used every year) $28K in car leases for sales personnel $19K in non-owner bonuses “not needed post-sale” $27K of normal business insurance Final adjusted FCF: ~$340KValuation dropped. Loan size reduced. Buyer injected more equity. 📌 Always test the addbacks.
🧠 Sin Spotlight: Fantasy Free Cash Flow
🧯 Deadly Sin: Addback Abuse = Fake Cash Flow We’ve seen appraisals with: ❌ Business travel labeled as “discretionary”❌ All advertising added back❌ Working owner and spouse payroll erased with no replacement If the addbacks are inflated, the cash flow is fantasy—and so is the value. 📌 SBA valuations must reflect economic reality, not seller … Continue reading 🧠 Sin Spotlight: Fantasy Free Cash Flow
📚 Valuation Myth: All Valuations Are Created Equal
The Myth:As long as the report has a number, it's reliable. The Reality:Not all valuations are based on credible data, accepted methods, or professional standards. Some are biased, boilerplate, or created to hit a target. Why It Matters:Relying on a weak or non-compliant valuation can lead to poor decisions — or SBA loss of guarantee. … Continue reading 📚 Valuation Myth: All Valuations Are Created Equal
Highland Global Business Valuations 