By: Chris Weingartner One of the most frequent questions we are asked by founders and entrepreneurs is whether their focus should be on growing revenues or achieving profitability, especially when it comes to the impact on Enterprise Value. It is a complicated question that presents meaningful tradeoffs unique to each company and one that companies…
By: Wesley Legg Many business owners would consider a company with a revenue growth rate of 40% exceptionally attractive. “Surely this is a well-founded business primed for a promising future. With a growth rate of 40%, this company will soon be a dominate player in their market.” But they’ve forgotten a key part of that…
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…