No business valuation is precise. To put it in a better way, all valuations are and will always be wrong because in finance, here are too many moving factors in addition to be required subjectivity when making analyses, for valuations to ever be accurate. However, it is better to be vaguely right than precisely wrong.
“Einstein was right about relativity, but even he would have had a difficult time applying relative valuation in today’s stock markets.”
“As the celebrated investor Warren Buffett once said, “Price is what you pay. Value is what you get.” We would add one more line: “If you do your homework.” In business deals, most buyers and sellers have a singular focus on price — and price is hard to avoid. Negotiations ideally produce numbers that both sides can be happy with. But getting to the right price in any deal involves understanding what business assets are truly worth and then structuring a deal around financing and tax realities, which can be quite surprising to those who fail to plan.”
Managers and investors alike must understand that accounting numbers are the beginning, not the end, of business valuation.
Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.
When a new idea comes our way, we must put it on our mental scales and weigh it carefully before deciding its value.