I am adding this (BCA) certification to my resume, so that it can aid me in valuing my own business acquisition deals.
I would like business sellers & buyers and current business appraiser's thoughts. What If My Valuation Forecast Is Wrong?
Below is a basic statement I am being taught in class:
You can pretty well be guaranteed that your forecast will be wrong! If business appraisers were able to always accurately predict the future, business appraisals would be very difficult to obtain as all business appraisers would be independently wealthy and likely not very inclined to work hard. There will always be some that refuse to look at or consider forecasts as they can always be considered speculative by definition. Business buyers do not buy historical results—they buy what they perceive the business is expected to generate in future earnings. This expectation is often highly influenced by past results; however, future prospects are the key. Future prospects mean a forecast.
The key question that should be asked about each and every forecast contained in a business appraisal report is not will the forecasted results actually occur? Instead, what should be asked is based on the economic outlook, the industry conditions and outlook, the specific company analysis of things like the product line, the competition, the condition of plant and equipment, and the historical financial analysis, does the income forecast make sense? Are the forecast assumptions well explained and supported?