Why can’t every revenue item be included in a business valuation?

A client recently asked why some revenue streams were excluded from our financial forecast during a business valuation.

The answer is simple: a valuation is only as reliable as the evidence supporting it.

In this case, certain revenue was recorded in the company’s internal financial statements, but:

• It had not been audited.
• It could not be reconciled with the company’s balance sheet or supporting records.
• We were therefore unable to independently verify the amounts.

As valuation professionals, we cannot include figures simply because they appear in an internal report. Every material item used in a valuation should be supported by sufficient and appropriate evidence.

This does not necessarily mean the revenue did not exist. It simply means we could not verify it to the standard required for a professional valuation.

When reliable evidence is unavailable, we must take a conservative approach. Although this may result in a lower valuation than management expects, it helps ensure that the valuation is credible, transparent, and can withstand scrutiny from investors, auditors, regulators, or other stakeholders.

A strong valuation is built on verifiable information—not assumptions.

If you’re preparing for a business valuation, ensuring your financial records are well-supported can make the process smoother and more reliable.

#ORNA #Consult #DCF #BusinessValuation