What are the Challenges of Using DCF for Entrepreneurs?
While DCF is a powerful tool, it has its challenges:
Estimating Cash Flows: Projecting future cash flows can be difficult, especially for startups with no historical data. Choosing the Discount Rate: Determining an appropriate discount rate requires a deep understanding of the business's risk profile and capital structure. Uncertainty: DCF relies on assumptions about future performance, which can be uncertain and subject to change. Complexity: The DCF model can be complex and time-consuming, requiring a thorough financial analysis and understanding of the business.