Navigating Unknowns: CFO Insights on Valuation

In theory, the value of an asset is the present value of its future cash flows, discounted appropriately for risk and time. That’s what the textbooks tell us. It’s elegant, even beautiful in its symmetry. But like most elegant things, it starts to fray at the edges when it meets the real world—especially when that world becomes unknowable.

In practice, the CFO lives in a marketplace that is often anything but rational or clear. We don’t get clean future cash flows. We get fog. We get variables that shift without notice, models that bend under pressure, and signals that distort when you need them most. And yet we must decide. Whether you are valuing a startup in an uncertain macroeconomic environment, a piece of IP with no obvious comparable, or a business line exposed to regulatory flux, the decision cannot be deferred. Capital must be allocated. Balance sheets must be signed. Investors must be told what something is worth—even if no one truly knows.

The traditional models—DCF, comparables, precedent transactions—are helpful. But they are, at best, scaffolding. And like all scaffolding, they are useful only when you remember they are not the building.

In times of clarity, precision is an advantage. In times of fog, judgment is the premium. And the greatest mistake one can make in an unknowable market is to insist on a false sense of certainty. When the data does not sing, do not hum the melody you wish were there. Instead, learn to hear the silence. Learn to see the shape of the fog and value accordingly.

Over the years, I’ve watched companies stumble—not because they lacked analysis, but because they mistook analysis for insight. They built ten-tab spreadsheets with exquisitely modeled assumptions, all pointing to a single number that was utterly divorced from reality. The model worked perfectly, right up to the moment it was needed.

So how should one approach valuation in unknowable markets?

First, acknowledge the fog. That sounds trivial, but it is not. Many boards and executives try to force visibility into the future through brute force: more modeling, more forecasting, more confidence intervals. But uncertainty is not a variable. It is a condition. It cannot be eliminated. It must be priced.

To price uncertainty, start by mapping what you don’t know. Then separate the unknowable from the merely uncertain. If you are evaluating a startup entering an untested vertical, you may not know adoption curves. That is uncertainty. But if the total market itself is undefined or the regulatory pathway is ambiguous, that is unknowability. Treat these categories differently.

Uncertainty can be hedged, offset, or diversified. Unknowability cannot. It must be contained through optionality or bounded through minimum viable commitments.

Second, resist the urge to overvalue precision. In unknowable environments, the goal is not to be precise—it is to be approximately right. That means developing valuation ranges and using scenarios, not single-point estimates. It means asking not “What is this worth?” but “Under what conditions is this worth more than we are paying?” and “Under what conditions does this deal expose us to ruin?”

If the downside cannot be absorbed, the asset is not underpriced—it is radioactive.

Third, return to first principles. When you cannot model cash flows directly, try to identify what must be true for value to exist. Ask, “What real-world behaviors or structural dynamics would support this valuation?” and “How long can we afford to be wrong before that optionality decays?” These are not spreadsheet questions. They are capital allocation questions.

A few years ago, I reviewed an acquisition target for a client. The target had grown rapidly but had not yet monetized. The asking price assumed a mature, scaled monetization model in three years. Rather than modeling a full DCF, we focused on one question: How fast would customer behavior need to convert to paid subscriptions to justify the price? That became the north star.

The actual conversion rate was unknowable. But the minimum conversion rate required was not. That threshold, when compared against analogs and structural constraints, told us more about the target’s value than any elaborate model could.

Fourth, incorporate behavioral dynamics into valuation. In uncertain markets, perception becomes a multiplier. A company might be worth 5x revenue on paper but trade at 15x if it is perceived as “category-defining.” That delta is not just hype. It is pricing power, recruiting leverage, and capital access. It can sustain a valuation beyond traditional logic—until it doesn’t.

The wise CFO knows that narrative is a valuation input, not a rounding error. But also knows that when perception detaches from fundamentals, the reversion can be cruel. Value the narrative. Then value the fragility of the narrative.

Fifth, value the optionalities embedded in the asset. Unknowable markets often create hidden value in the form of strategic options. Can the business pivot? Can its technology serve adjacent markets? Can a distribution channel be monetized in a different form? Optionality is messy. It’s hard to model. But in uncertain times, it is often the only thing that matters.

A company that loses its primary market but has built flexible infrastructure may have more value than one that dominates a single niche but has no ability to adapt. Value is not what exists today. Value is what can survive tomorrow.

Sixth, be honest about your exposure to being wrong. In unknowable markets, the asymmetry of error matters more than the central estimate. A deal that is slightly overpriced but has capped downside might be wiser than a seemingly underpriced asset with structural fragility.

Ask: If we are wrong, how wrong can we afford to be? What is our time to recognize the error? How fast can we adjust? Value is not static. It is dynamic, contingent, and always partially concealed by time.

Seventh, price strategic control. In foggy markets, control becomes more valuable, not less. The ability to pivot, restructure, or hold cash becomes a premium. Do not just price what you are buying. Price what you can change about what you are buying. That is where value is created when markets shift.

Eighth, prepare to revalue continuously. In stable markets, valuation can be an annual event. In volatile or unknowable conditions, valuation is a standing conversation. What you thought was cheap in January may be overpriced in June. Create models that update with real data, not just assumptions. Build feedback loops. Let operating signals update your valuation in real-time.

Finally, value with humility. The fog is not something to conquer. It is something to navigate. Many CFOs feel pressure to present confident valuations. But real leadership lies in acknowledging what is unknown, framing it clearly, and preparing for multiple outcomes.

The role of the CFO in such times is not to find the perfect price. It is to build the framework for rational decisions amid imperfect information. That is not weakness. That is stewardship.

The market does not reward those who guess right. It rewards those who endure when others guess wrong.

In the final analysis, pricing assets in unknowable markets is not a science. It is not even an art. It is a discipline. A discipline built on curiosity, skepticism, adaptability, and above all, a refusal to be seduced by the illusion of certainty.

In my own experience, some of the best decisions I’ve made were the ones where we said no. Not because the asset was bad. But because the fog was too thick, the optionality too low, and the exposure too great.

And some of the best yes decisions came not from brilliant analysis but from quiet confidence that the structure of the deal gave us time to learn, room to adjust, and protection from the downside.

Valuing the fog means knowing that not all darkness is the same. Some is temporary. Some is structural. Some can be navigated. Some must be avoided.

The task of the CFO is to see clearly when the world does not and to act wisely when others flinch.

The next time you are asked to price an asset that lives in the fog, do not bring only your model. Bring your judgment. Bring your clarity. And above all, bring your humility.

Because in unknowable markets, those are the only tools that matter.