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
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.