Category: Business valuation
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Why is cash more important than profit?
When valuing a company, one of the most common methods is Discounted Cash Flow (DCF). And as the name suggests, we look at cash — not profit. A company can show strong revenue and profit margins on paper, but that doesn’t guarantee it has the cash in hand. For example: This is why in business…
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How do you repay debt when you don’t have cash?
At the beginning of this year, Company A borrowed money from Company B.The deal was straightforward: repay the loan plus interest by year-end. But there was a condition.If Company A couldn’t repay in cash, the repayment would be in shares. So the big question became:👉 How much is one share of Company A actually worth?…
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“We’re making 1k a year and we have no debt. How much can we sell our business for?”
That was the first question from one of our clients. On paper, it was the dream company: It was like reading the definition of a cash cow in a textbook. But valuation is never just about the headline numbers.When we dug into their revenue structure, we found most of their products had razor-thin margins —…
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Why a company needs specialization
During a recent management interview, we asked about revenue structure and profit margin for each product category. This company distributes two types of goods: That’s the beauty of specialization:👉 The harder it is for competitors to copy what you do, the higher your margins.👉 The higher your margins, the more valuable your business becomes. When…
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The more you make, the less you earn?
In some business valuations, we’ve seen companies where profits shrink as revenue grows. Sounds strange, right? But it happens. Why? Because the cost of expansion can outweigh the extra margin. For example, a company may need to take on heavy overhead costs to boost production—but if sales volume isn’t high enough, those costs eat up…
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“Should my company go public?”
We often get this question from business owners whose companies are doing well. Here’s the truth: just because you can list your company doesn’t always mean you should. ✅😊 Benefits of being listed ⚠️ Costs & challenges of being listed So before you decide, weigh the pros and cons. Going public can be powerful, but…
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Why do we need to break down revenue structure?
Each revenue stream carries its own story. Some lines of business generate higher margins because they require specific know-how, while others face intense competition and are easily replaced — leading to thinner margins. That’s why we can’t simply take total revenue, apply a growth rate, and call it a forecast. When we request for information,…
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💡 “If I invest xx, how many shares of the company should I get?”
This is a common question we get from business owners and investors. In many cases, the company knows how much cash it needs, but neither the seller nor the buyer knows the true value of the shares. 👉 That’s where we come in. As a third-party consultant, we gather the right information: ✅ Past financial…
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“We’re just a small company, we don’t have projections.
This is what we usually get when we ask for a company’s forecast. But projections don’t need to be big complicated tables with hundreds of numbers. What we really need to know is simple: We ask these questions because in order to value a company, we need to forecast its revenue for the next…
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Things we consider when valuing a company
1️⃣ The past – What has the company actually achieved? We look at audited financial statements to see the real, proven performance — not just estimates. 2️⃣ The plan – Usually a 5-year projection from management. This includes revenue growth assumptions, expected profit margins, investment plans, and funding requirements. 3️⃣ The industry outlook – Is…
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