We’re wrapping up a mini-series on Value Builder drivers within our series on Business Valuation
In today’s episode, David and Eric discuss: Financial performance, Growth potential and the Valuation “teeter totter”.
In depth we discuss the three main moving components mathematically on the business valuation. These components are the inherent cash flows in the business, the growth rate (or projected growth rate) of the cash flows in the business, and then the discount rate (or the actual risk within those numbers).
We discuss the importance of maintaining your books on an accrual basis. We also discuss why you might also want to consider having your financials reviewed or audited by a CPA firm and how all of this can increase what a buyer might pay for your business.
We conclude the conversation by talking about the valuation teeter totter value driver and how it is another name for working capital. We discuss practical action items to challenge the status quo of payments terms in your industry.
We reference this article written by David about his interaction with a friend who risked growing his business into bankruptcy by not understanding working capital: https://www.emergedynamics.com/post/growing-yourself-into-bankruptcy
We also mention advice from Professor Aswath Damodaran of NYU. You can listen to his lectures for free online here: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/home.htm
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