(business valuation – 5 minute read)
Hi there accounting fans!
Let’s talk about the concept of business valuation.
Business valuation is the process of determining the economic value of a company. It’s an important step in a variety of business transactions, including mergers and acquisitions, financing, and estate planning.
How to value your business?
There are several methods used to value a business, including the income approach, the market approach, and the asset approach.
The income approach estimates the value of a business based on its future financial performance, such as its projected profits and cash flow.
The market approach estimates the value of a business based on the sale prices of similar businesses in the market.
The asset approach estimates the value of a business based on the fair market value of its assets, such as property and equipment.
Obviously, there is more to the valuation methods than that. For more in-depth information, you should consider talking to an accountant to conduct business valuation for you
What’s the goal of business valuation?
No matter which method is used, the goal is to determine the fair market value of a company, which is the price that a willing buyer and seller would agree upon in an open market.
Business valuation is an important consideration in a variety of business transactions because it helps determine the value of a company and the terms of a deal. It can also help identify any potential issues or risks that could impact the value of a company.
That’s business valuation in a nutshell! If you are looking for specialist advice in valuing your business, get in touch with our team at SH Advisory!