How to determine the value of a business

Assessment of the real value of a business may be required in various situations: when attracting investments, buying and selling a business, drawing up a business plan for further development, and so on. The determining value of the business valuation process is the value of the company's assets.

You will need

• - data on the company's assets (financial investments, real estate, equipment, stocks, intangible assets);

• - data on the efficiency and income of the business for the greatest possible period of time.

Instruction manual

1

The value of a business is a reflection of its performance. Calculation of the cost is necessary for making the right decisions regarding the future development of the enterprise, as well as when deciding on the purchase and sale of the rights of the owner or investment of this business object.

2

Assess the value of the business in several stages. Gather information about the valuation subject based on documentary evidence of all the data collected. Carry out an analysis of the sector of the market to which this business belongs, consider similar property complexes.

3

Make calculations according to the main approaches to business valuation. For example, to evaluate a business as profitable, use three main approaches: profitable, costly, and comparative. Coordinate the results obtained during the calculations by various methods.

4

When conducting an appraisal examination, consider the value of all the company's assets:

- financial investments;

- real estate;

- equipment;

- stocks;

- intangible assets.

5

Since a business is an investment product, since costs and revenues are spread over time, to determine the real value of a business, take into account data for a possibly longer period of time and evaluate separately:

- business performance;

- available, current and planned revenues;

- development prospects;

- The level of competition in this business sector.

6

As factors determining market value, consider:

- current and future profit, costs of creating a similar business at the present stage (the same tangible and intangible assets and market position);

- the ratio of supply and demand for property complexes;

- similar to the business being evaluated, time of receipt of income, and also liquidity of assets.

7

If the purpose of conducting a business valuation is to perform certain legal actions with the business, consider engaging an independent appraiser with the appropriate license for cooperation, as an official opinion on the value of the company will be necessary.

note

If the results of the assessment are enough to be presented in the form of a conclusion, and not an official assessment report, then to reduce the costs of the assessment, when drawing up the assignment to the evaluator, identify specifically individual procedures from the package of legally binding ones.

Useful advice

For Russian conditions, the most relevant methods of the income approach are the method of income capitalization and discounting flows.