Seeking Advice on Valuation Prerequisites
I’m currently working at a brokerage firm, where my responsibility is to simplify the business-selling process for small business owners. My explanations mainly focus on practical advice rather than in-depth valuation applications. For example, I often share guidance like:
- “If you intend to sell your business, these aspects require appraisal…”
- “Here are some effective strategies to enhance your business’s value…”
- “These types of companies are more likely to be interested in buying your business…”
Recently, I’ve developed a keen interest in valuation and want to dive deeper into the topic. I aim to understand the underlying process better, especially since this is a long-term career path for me.
I started reading Investment Banking: Valuation, LBOs, M&A, and IPOs, and while I grasp the concepts well, I often find myself lost when it comes to the figures presented in the book.
To improve my understanding of these figures, I’ve created a study guide that begins with the basics of Accounting:
Basic Financial Statement Reading
– Income Statement
– Balance Sheet
– Cash Flow Statement
Profitability and Cash Flow
– Profit: Gross Profit, Operating Profit, Net Profit
– Cash Flow: Free Cash Flow
Introduction to Capital Markets
– Primary vs. Secondary Markets
– Sell Side and Buy Side
finance Formulas
– Excel Fundamentals
Financial Math
– Simple and Compound Interest
– Nominal vs. Effective Interest Rates
– Discounted Cash Flows
– Statistics for Finance
Additional Topics
– Calculating Relevant Ratios and Metrics
– Discounting Cash Flows
– Estimating Growth Rates
This is my current outline, and I also plan to reference CFI’s syllabus for additional lessons. Do you think this curriculum is adequate as a foundation?
Additionally, I’ve discovered several valuable valuation courses on YouTube that I’m considering exploring.
EDIT: I’ve fixed the formatting.
One response
It sounds like you’re on the right track with your self-study and have a solid foundation laid out! Understanding valuation is a crucial part of your role, especially if you’re communicating with small business owners who might find the topic daunting. Here’s some additional guidance and resources that could further enhance your study plan:
Prerequisite Topics
Consider also understanding the concept of financial ratios derived from these statements—this ties into your goal of calculating relevant ratios.
Profitability and Cash Flow
Make sure to not just know the definitions but also how they are calculated and why they matter in business valuation.
Introduction to Capital Markets
It may also be beneficial to understand the types of investors and what they look for in a business, especially if you’re working with small business owners considering selling.
finance Formulas and Financial Math
Your list here is comprehensive. Focus especially on DCF (Discounted Cash Flow) as it is central to many valuation techniques. Be sure to practice calculations to gain confidence.
Valuation Techniques
Additional Resources
Practical Application
When you feel comfortable with the concepts, try to apply them to real-world examples. Analyze small businesses’ financials (if you have access) and perform mock valuations.
Community Engagement
Join finance-focused forums (like Wall Street Oasis or Reddit’s r/finance) where you can ask questions, share insights, and learn from others in the field.
By structuring your study plan as you have, and gradually incorporating these additional resources and techniques, you’ll likely develop a strong foundation in valuation that will benefit you in your role. Good luck!