The Net Present Value calculation indicates a business is worth its “risk adjusted future cash flows.” The future portion of that statement indicates that buyers are willing to pay more for something they anticipate growing. This is practically seen by two of the most common approaches to business valuations using cash flow projections: DCF and…
By: Wesley Legg Definition: A company’s total addressable market is the total annual revenue opportunity available for a given product or service. Example: Suppose a company sells exterior residential doors. The total addressable market is the total value of doors sold each year. This could consist of both door replacements and new housing starts. We…
By: Wesley Legg Many companies tout their differentiation and innovation, yet the clearest way to determine if this actually exists is by evaluating a business’ relative margins. Having higher margins than the industry average usually denotes a competitive advantage, like having low cost advantage or having pricing power because of a brand. Having above average…
By: Zane Tarence When selling a company or seeking investment, there is no larger deterrent to a premium valuation and a smooth closing than messy financials. For growth companies running at full speed, maintaining accurate and up to date financial statements can easily slip to the bottom of the task list. While it is a…
By: Billy Pritchard & Tate Fowler Once full-year data is officially aggregated and reported, it will be no surprise that 2022 will be viewed as a down year for M&A activity across all industries, with private software transactions declining significantly. During the first three quarters of 2022 756 SaaS M&A transactions closed, a ~17% reduction…
By: Wesley Legg In founder or family-owned businesses, it is common for owners to run personal/non-company related revenue or expenses through the business or to expense certain items that would normally be capitalized. While these practices may come in handy during tax season, they can seriously impact a company’s valuation. If you are a business…