This represents the discount factor we use to calculate your Present Total Value in the DCF pro forma.
We start with a base discount rate of 21%, viewing this industry as one would a nano-cap company (<$50mm revenue). But we've also identified that these business are even riskier - they're usually much lower than $50mm in revenue, typically have only one or two owners, and are heavily relationship-driven. Because of that, we've identified three additional risk areas: Business, Client, and Market risk.
We will then add up to an additional 5% in each of these three areas to arrive at your total discount factor.
Most of our users average a total DCF of somewhere between 32-34%. The highest discount rate that can be applied is 36%.