FAQ
Methods
7 published.
·1 min
What is the difference between enterprise value and equity value?
Enterprise value is what the operating business is worth. Equity value is what reaches you — after debt is deducted and surplus cash added. The gap is often six figures.
·1 min
What is terminal value?
Everything beyond the forecast horizon, compressed into one number. In an SME discounted cash flow it is usually 60 to 75 percent of the total valuation.
·1 min
What is asset-based valuation?
Net assets restated at realistic values. It sets the floor for most businesses and the actual price only where earnings are weak or the assets are the business.
·1 min
Which valuation method is most accurate?
None of them. Accuracy is the wrong frame — the useful method is the one your buyer will use, and for most SME transactions that is an earnings multiple.
·1 min
Why do valuation methods give different answers?
Because each encodes different assumptions about the future. The gap is not an error to average away — it is the most useful output of the whole exercise.
·1 min
What discount rate should I use?
18 to 25% for an owner-managed SME. Below 12% implies a predictability most small businesses do not have; above 30% usually means the forecast is the problem, not the rate.
·1 min
What is a DCF valuation?
A method that forecasts future cash flows and reduces each year by a discount rate reflecting risk. For SMEs, terminal value is usually 60–75% of the answer.