Four rules against double counting
The fastest way to undervalue a business is to punish one problem twice. Four written rules decide where each thing is counted, once.
Why this matters
The quickest way to undervalue a business is to punish the same problem twice: once in the forecast and again in a discount, or once as a debt and again in working capital. Each looks reasonable on its own; together they cut the value by a risk that only exists once.
Each rule below names something that could be counted twice and says where it is counted instead.
The four rules
Counted through the forecast, not as an asset too. The cash your customers will pay is in the forecast. What the customer list would fetch if sold on its own is shown as the floor and a market lens, never added on top.
Applied by the engine
In working capital or in debt, never both. Cash collected for service not yet delivered is a liability the buyer inherits. The sample carries $212k of it. As concluded, it sits inside working capital and is settled through the peg; a buyer who takes it off the price dollar for dollar arrives at a lower number. The report shows both and doesn’t pick a side.
Applied by the engine
As a state of the world, not as a separate charge. The sample’s worst case, removal from the Robocall Mitigation Database, is its own state with 3% odds and an equity value of $769k. There is no second distress charge on top.
Applied by the engine
In the discount rate or in a scenario, never both. This is the method’s rule. In the sample it holds: the one company-specific premium point, half the traffic on one carrier, is not also a state, and the regulatory listing is priced as a state and adds nothing to the rate because the filing is current.
The method’s rule · checked on the sample
Three of the four are enforced in the engine’s arithmetic. The fourth, one home for any risk, is the method’s rule: the policy is written to follow it, and each report can be checked against it the way we checked the sample above.
Two more places it shows up
- The plan’s movesEach move is priced after the ones before it, so their interactions are counted once and the five add up to the total.
- Driver treesA measure that matters to two branches enters once and is referenced after, so its effect isn’t counted twice.
How to read it. Same business, same $212k. The report shows both so the difference becomes a negotiating point you see coming, not a surprise.
- Deferred revenue. Concluded equity $3,933,435 with deferred revenue inside net working capital; $3,721,435 with it treated as debt-like
- Floor. Porting value of the book at 0.6–1.0× service revenue in an orderly port, less 15–25% of the book lost in the port, shown as a lens and a floor; not added to the forecast value
- Gate state. Weight 3% for a listed provider; equity in the state $769k from distressed porting; no separate distress-cost term
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