By Tom Wacher, Kreston Reeves
The BBC’s Dragons’ Den is now in its 16 th season with the highs and lows of building a business remaining compelling viewing. It entertains and can be excruciating in equal measure, particularly when the Dragons roll their eyes following a wildly optimistic valuation of the hopeful’s business. So why is it so difficult to value a business? Partner Tom Wacher highlights some of the more common mistakes.
1: Unrealistic revenue and profit projections
The first mistake is unrealistic revenue and profit projections. There are many ways to value a business, most of which are broadly based on multiples of revenue and/or profits.
With established businesses that have a trading record, determining this is a relatively straightforward exercise with years of historic data to draw upon....