Enterprise value and equity value are not the same thing, and for privately held businesses the difference can materially change what an owner actually receives at closing or what an investor is really buying. Enterprise value reflects the value of the operating business before considering how it is financed, while equity value reflects the residual […]
Customer concentration can materially reduce the appraised value of a privately held business because it increases the risk that a buyer will not realize projected cash flow after closing. In valuation terms, heavy dependence on one or a few customers can lead to lower EBITDA or SDE multiples, higher discount rates in a discounted cash […]
Recurring revenue often commands premium valuation multiples because it gives buyers and appraisers a clearer, more dependable view of future cash flow. In a privately held business appraisal, predictability reduces risk, supports higher forecast confidence in a discounted cash flow analysis, and can justify stronger EBITDA, SDE, revenue, or ARR multiples than a company that […]
Discount for lack of control (DLOC) and control premiums are two of the most important concepts in business valuation because they explain why the same company can have different per-share values depending on the rights attached to the ownership interest being appraised. In practical terms, a controlling block of equity is worth more per share […]
Discount for Lack of Marketability (DLOM) is one of the most important valuation adjustments for privately held businesses because it recognizes a practical reality, an ownership interest that cannot be readily sold usually has less value than a comparable interest in a public company. In business appraisal, DLOM is not a formulaic add-on. It is […]
EBITDA multiples are one of the most widely used shortcuts for estimating the value of a privately held business, but they are only meaningful when placed in context. A multiple is not a standalone number, it reflects the market’s view of risk, growth, concentration, capital intensity, and transferability. For business owners in the United States, […]
The market approach is one of the core methods used to estimate the fair market value of a privately held business. It relies on real-world pricing evidence from comparable public companies and completed transactions, then adjusts that evidence so it can be applied to the subject company. For owners, buyers, and advisors, this approach is […]
Weighted average cost of capital, or WACC, is one of the most important inputs in a business valuation because it translates risk into a discount rate, and the discount rate determines how much today’s dollars are worth compared with future cash flows. For privately held businesses, even a small change in WACC can materially shift […]
Terminal value is the portion of a discounted cash flow (DCF) analysis that estimates what a business is worth beyond the explicit forecast period, and for most privately held companies it is the single biggest driver of indicated value. Because a DCF converts future economic benefit into present value, the terminal value often accounts for […]
Discounted Cash Flow, or DCF, is one of the most conceptually powerful methods in business valuation because it estimates what a privately held business is worth based on the cash it is expected to generate over time. In practice, however, the output is only as reliable as the underlying assumptions. For business owners, buyers, and […]