Why some revenue are useless in business valuation

Sometimes when we do business valuation using the discounted cash flow (DCF) method, we actually have to ignore some parts of the revenue.

Here’s why 👇

1️⃣ One-time event – it happened once and won’t happen again.
2️⃣ Discontinued operation – the company no longer operates that business line, so it shouldn’t appear in future forecasts.
3️⃣ Unstable revenue stream – if it’s been up and down for years and unpredictable, we take the conservative route and exclude it from the forecast.

Basically, we cut off anything that’s not part of the company’s normal operations.
In our forecast, we only consider revenue that’s proven stable over time or represents the main income stream of the business.

The exception?
If the company is certainly entering a new revenue-generating activity — even if it’s one-off — and it’s 100% confirmed (e.g. selling a building with a signed contract), then we’ll include it in the forecast for that particular year.

Not all revenue counts in a business valuation.

At ORNA, we focus on what’s real and sustainable — because real value is built on consistent performance

📞 Message us if you want a second opinion on your valuation or financial model.

#ORNA #DCF #Consult