Do's & Don'ts with Forecasting to Determine Valuations

<p>We are often faced with the overwhelming influence from sellers to put aggressive weighting on financial forecasting when it comes to determining valuations. The reality is that while forecasting has a significant impact in determining valuations it doesn't always have a positive impact. </p><p>Points we discuss in this episode:</p><ul><li>Forward-looking performance of the company can be incorporated into earnout type structures</li><li>Forecasts can shed light on new business lines maturing and becoming a more meaningful part of the financial picture</li><li>Forecasts provide buyers with the information they need to make assumptions on a combined businesses performance</li><li>Forecasts that are in line with historical performance are more likely to be weighted vs those with major spikes in performance</li><li>Forecasts containing major reductions in OpEx to achieve a new degree of EBITDA need clear understanding and in many cases require some historical proof points to be considered in valuations.</li><li>Forecasts with major upward shifts in revenue without any historical performance to support the improvement will almost certainly be discounted</li><li>Forecasts are an important part of valuations when the combination currency is stock/equity.  Mergers and acquisitions that are funded by stock almost always allow for a more aggressive valuation based on future performance</li></ul><p>Listen to Shoot the Moon on <a href="https://podcasts.apple.com/us/podcast/shoot-the-moon-with-revenue-rocket/id1478519505">Apple Podcasts</a> or <a href="https://open.spotify.com/show/6y7u9KuOjaplhScHtINGZU">Spotify</a>.</p>