Tag: Consult
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đŠ When âhigh revenueâ isnât enough: a real case we just handled
A client came to us with a tempting deal. They inherited a piece of land.A target companyâhigh revenue, high barriers to entryâwanted to use that land as collateral to borrow more money from a bank.In return? Shares in the company. At first glance, it looked exciting.We received audited financials, internal statements, and spoke with management…
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Why revenue growth doesnât always increase value
We recently worked on a valuation where increasing revenue growth actually led to lower net income. This is because growth often comes with additional fixed costs â new staff, larger facilities, expanded operations. If the incremental revenue isnât enough to cover those costs, profits can actually decline in the short term. So during expansion, you…
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âWhen a forecast looks too good to be trueâŚâ
Sometimes during a business valuation, management shows us a revenue projection that suddenly jumps far above the last few years. Maybe revenue was flat for 3 yearsâŚThen the forecast shows a big surge next year. At that point, we have to ask a simple question: âWhat is driving this growth?â If the answer is âWe…
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Is Your Business Hanging by a Thread?
When valuing companies with high levels of debt, one thing often becomes clear: Some businesses are operating very close to the survival line. Interest expenses and other fixed costs donât wait.Because of this, companies often need to maintain certain numbers just to keep enough cash for daily operations. In many cases, survival depends on three…
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Using P/E ratio to value a company sounds simple.But itâs often wrong.
Sometimes clients ask if we can estimate the value of a company by simply applying P/E or P/B ratios from listed companies in the same industry. In theory, the approach is straightforward. We take the book value or earnings of the target company (from the latest audited financial statements) and multiply it by the P/B…
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Why Cash Is King đ
When we do a business valuation, the most important item isnât revenue nor profit. Itâs the cash. Because at the end of the day, a company survives on cash â not accounting entries. Revenue can be recordedâŚbut the cash might not come in yet. Expenses can be bookedâŚbut the payment may not have gone out.…
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Debt Restructuring đ¨ Warning sign⌠or survival strategy?
Sometimes, the hardest part of reviewing a company is seeing how much financial pressure it has gone through. We recently evaluated a company with a history of losses and a significant amount of bank debt. Under normal circumstances, the repayment burden would have severely strained its cash flow. But instead of defaulting, the company negotiated…
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Why using P/E alone might be misleading
A recent client tried to estimate their companyâs value by applying the P/E ratio of similar listed companies.While PE is one of the most popular methods being used , itâs not a recommended one for this company. Here is why. Two companies can be in the same industryâŚand still be completely different businesses. Different: And…
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Why we still need a management interview (even when we already have all the documents)
When doing a business valuation, yes â we have an information request list (IRL).Yes â we collect solid documents.Yes â we look at audited financial statements. But documents only tell us what happened.They donât tell us why. For example:⢠Why did revenue drop last year?⢠Why did interest expense suddenly spike?⢠Was it a one-off…
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Why a Business Valuation is like a Health Checkup
We were recently hired to value a company. No deal.No buyer.No IPO plan. So why do it? Because the management wanted to see their business from an outsiderâs perspective. A valuation without an active transaction is actually very powerful. It forces you to ask: In many cases, the number is not the most important part.…
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