Business Valuation Tips: Developing Five Year Financial Projections
Back to Sellers

  • Optimal buyers seek to acquire businesses that will enhance operations and contribute to future growth.

  • Optimal buyers value acquisition opportunities based on future cash flow potential.

  • Utilizing sound, current and credible market research is an important first step to developing credible financial projections.

Your business valuation is driven by future value.
 

• While understanding the past performance of a business is an important step to framing valuation expectations during a business valuation, buyers are ultimately paying for the future cash flows of a business.

• Combining business judgment with sound market analysis to derive reasonable financial projections is therefore critical to achieving maximum value.


In negotiating valuation, a seller should:

• present the strategic and financial merits of the proposed transaction

• convince the buyer of the future cash flow potential of the business

• quantify the resulting revenue and cost synergies

 
Use market analysis to support financial projections.
 

• Utilizing sound, current and credible market research is important to supporting the future cash flow potential of a company.

 
Build a five year pro forma financial projections model that buyers will have confidence in.
 

• Utilizing defensible and realistic market assumptions in the context of a combination with the buyer as well as quantifying related synergies will allow the seller to convince the buyer of the value proposition of the transaction.

• Addressing future market penetration, revenue growth and cost savings opportunities, is an important component to maximizing value.

 
Generational Equity understands the dynamics that drive business valuation discussions.
 

• With decades of collective experience, Generational Equity’s representatives have considerable experience in conducting rigorous market research and analysis to effectively market and position your company.

We are experts in helping companies develop sound, defensible financial projections that will serve as a key component in negotiating for maximum value.


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