Business valuation is the process of determining business economic value.
Business value is not something that is set in stone, instead it is very dynamic and can change as a result of multiple factors.
Some of the factors that can influence business value are:
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current state of the market in general
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actual revenue and profitability of the company
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projections of the future performance made by management or industry’s experts
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value of the company’s assets (actual and forecasted)
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degree of dependence on a key person
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any investments and modernization needed
etc.
As we mentioned above, business value is changing over time, but it is also worth noting that business value determined at exact moment of time is not a set amount but rather an interval of most probable values.
The valuation is usually performed by different methods. The most widely used methods of business valuation are:
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Market Value Method: if the value of comparable businesses is determined or can be determined based on available data, it can be used to define the target company’s valuation by applying different coefficients. This valuation method is the most subjective one and is typically used for the preliminary valuation or as a back-up option
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Asset-Based Method: this approach considers business value as a total net asset value, minus the value of total liabilities
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Discounted Cash Flow Method: long-term projections of company’s future performance (usually in form of financial models are used to determine its value. In this method the accuracy and reasonableness of the projections is critical
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ROI–based Method: this method is based on the company’s profit and estimate of return on investment (ROI) an investor could potentially receive when selling the business. This method is one of the most popular valuation strategies and can be used for companies of many different sizes
There are numerous reasons why you might need to perform business valuation:
- Mergers and Acquisitions – in this case valuation is beneficial to both the seller (as he wants to to set up a reasonable yet high enough asking price) and the potential buyer (to make sure he/she is about to pay reasonable price or find out that there is a room for negotiation)
- Funding: objective valuation is necessary when you want to raise the capital before starting negotiations with banks, venture capitalists or other potential investors
- Litigation Support: when the value of the business is an issue, having professionally prepared appraisal report is key and will definitely strengthen the case
- Disputes among shareholders or partners: when one of the stakeholders wants to dispose of his/her share or interest and other stakeholders want to acquire his/her share or interest
We are here to continuously support our clients in accomplishing their business and personal goals
If you need business valuation services, you are in the right place!
It doesn’t matter if you are the buyer or seller, here at SunTax Consulting we can definitely help you with your business valuation.
Our professional analysts are experienced in applying different valuation techniques and determining the objective value of the business. You will stay stress free and confident that you are selling or buying business at a reasonable and fair price!
Do not hesitate to contact us to find more information.
You also may be interested in our Corporate Due Diligence services.
