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Four Basic Rules for Business Valuation

There are occasions when business owners want to estimate the worth of their business. It is quite imperative to assess business valuation to know whether you have significant asset or liabilities. Mostly, true valuation of business occurs only when business owners sell the business. However, there are four basic methods of business valuation such as Market based, Earnings Based, Asset Based, and Cash-Flow based. Let’s briefly know about these valuation methods:

  1. Market based approach – This is a valuation approach in which value of business is decided by doing a comprehensive analysis of the market and the competitors.
  2. Earning Based Approach – This valuation approach is quite close to the market approach and there is a categorized formula (Earning Based Valuation = Average of normal EBT/capitalization rate) which determines the earning based valuation of the company.
  3. Asset approach – It is an approach which is widely used to determine the liquidation worth of a running business.
  4. Cash Flow Based valuation – This approach is quite close to earning based approach that estimates the value of business depending on the future cash inflow into the business.

The above-mentioned methods are the perfect for estimating valuation of a company in respect to the market scenario. The business valuation helps owners to evaluate performance of their team, setting goals to achieve, doing exit planning, and a lot more. If you are looking for an adviser to assist you in doing proper valuation, then count on ValleyBiggs to get the best results.

ValleyBiggs is a renowned merger and acquisition firm of the nation, which offers business valuation services at the most attractive prices. Besides business valuation, the firm also provides business solution, including business financing, acquisition assistance, buy-side M&A Services, exit strategies services, and sale-side M&A Services.

Published on: February 17th, 2017