The right value of your business depends on many factors, including the economy, the fundamentals of your business and even sometimes emotion. Thus, as mentioned before it’s important to get professionals to help you with the valuation of your business.
Here are three approaches a valuator may use:
- Asset based
- Earnings based
- Market based
Asset based valuations can be done on a going concern or on a liquidation basis. A going concern asset-based approach lists the business net balance sheet value of its assets and subtracts the value of its liabilities. A liquidation asset-based approach determines the net cash that would be received if all assets were sold and liabilities paid off.Earnings based value lies in a business’ ability to produce wealth in the future. Simply put, a valuator will attempt to determine the expected cash flow for the company using past earnings multiplied by a capitalization factor. Capitalization factor is a rate of return a potential buyer would expect on the investment.
Market based value compares your business to similar businesses that have recently sold. This is similar to buying and selling your home.
About Brightblue Transition Solutions
Located on Vancouver’s North Shore we are the premier business broker in the lower mainland, contact us if you need any help buying or selling a business in the greater Vancouver or lower mainland areas.
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