Discounted Cash Flow Methodology

One of the basic tenets of valuation is the value of any asset is a function of the future cashflows from that asset. This principle applies to income based valuations like Future Maintainable Earnings, where an income stream is expected to continue indefinitely into the future or market based valuations (Net Realisable Assets) where the

My business is worth WHAT!

As a Forensic Accountant, I’ve had the following conversation too many times… Business Owner – “I’ve decided it’s time to retire. How much is my business worth?” Advisor – “How much do you think it’s worth?” Business Owner – “I really don’t know but, if I had to guess, I’d say around $2.5 Million.” Advisor

Challenging Business Valuations in Family Law

I recently gave a presentation for Legalwise Seminars on Understanding and Challenging Business in Family Law at the Hilton Hotel Sydney. Audience participation really picked up on the two main areas of Future Maintainable Earnings valuations being the valuators subjective opinion on the level of future maintainable earnings and the capitalisation rate. The biggest mistake

Checklist for the Evaluation of an Internet Business

I recently received an email asking us to value an online business and I developed a list of information that you should get to ascertain whether it is worth continuing in your investigations of the business.

When we are examining a business for business valuations or commercial litigation, we look at the financial statements, tax returns etc for the story that they tell about the business and comparing that to the story of the owners of the business.

Ideally those stories should agree, but it is not always the case.

Factors in Determining the Level of Future Maintainable Earnings

Valuations are dependent upon a number of subjective assumptions. One of the main assumptions involves the level of expected future profitability. It is common to see as a basis for future earnings the average of the previous three years. Whilst the average of the previous three years may be appropriate, the reasons for choosing that

Understanding the Capitalisation Factor – Business Valuations

The most common method of valuing small profitable businesses is the Future Maintainable Earnings (FME) method. The formula for calculating the value of a business is: Future Maintainable Earnings X Capitalisation Factor = Value of Business The capitalization factor is defined as: “any multiple or divisor used to convert anticipated economic benefits of a single