How to value your business?

“Business Valuation” can determine the economic value of an entire business or part of a business.

It is used to determine the value of a business, from legal issues to divorce, including tax

payments, establishing business partnership and sales values for Mergers&Acquisitions.

There are several ways to determine the value of a business.

The common approaches and methods are:

(1)Asset Based

You value the asset of your business. For example: Building, Machine, Products, and

Goodwill.

The net value of a business’s assets, both tangible and intangible, minus the value of its

liabilities.

Businesses that hold investments or real estate; that are not generating a profit, or are

seeking to liquidate are suitable for this method.

(2)Market Based

The Market based approach valuation is based on company value’s the purchases and

sales of comparable companies within the same industry.

This method is popular to consider the value of comparable companies that have sold in

recent times or whose value is already in the public domain.

It is suitable for any business as long as there is sufficient data on comparable companies.

(3)Balance Sheet Based

Balance Sheet based method seeks to determine the company’s value by estimating the

value of its assets.

These are traditionally used methods that consider a company’s value lies basically in its

balance sheet.

Some of these methods are the following: book value, adjusted book value, liquidation

value, and substantial value.

(4)Income Statement based

Income statement is process of calculating a company’s value by estimating business’s

future profitability before depreciation, Interest and Tax. (IBDIT).

This method is suitable for established businesses with stable revenue.

(5)Discounted Cash Flow (DCF) Method

Discounted Cash flow method is based on forecasts of future financial cash flow to

determine the current market value of a business, taking into effect many factors like

inflation, risk and cost of capital and analyse the company’s performance in future.

This method is suitable for newer business with high-growth potential, but which aren’t yet profitable.

The above methods are not fixed but may be appropriate depending on the tasks to be

performed.

If you are looking for the best way to determine the business value of your business, Please contact with us.

Try your first step with Stratecx.