Have we seen the end of "cap rate" valuations?


Rod Burkert further comments that, a half dozen years ago, he could often do capitalized cash flow (single period) valuation for smaller, stable businesses. “Some average of past results was a reasonable proxy for what the company could expect to see on a go-forward basis.”  But, now, nearly every business requires a projection and a discounted cashflow analysis.  As one audience member commented, “this makes us even more dependent on management’s five year forecasts, and we haven’t always questioned those, as CPAs or as appraisers, as carefully as we should.” Rod agrees, and comments that this is one more pressure on our ability to run our appraisal businesses profitably—knowing that we’re almost always going to need to do a DCF.

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