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Understand business valuation doesn’t have to be hard. To put it simply you either value the assets only, or you value the whole business by looking at its income and applying a multiplier. Watch this short video to see how.

Understand Business Valuation – Transcript:

Welcome to the BCI business brokers and
evaluate business.com do business
valuation model business valuation is
complex but it doesn’t need to be too
complex it’s much easier if you follow
the logic so the first question that
business valuer or broker is going to
what is the income return is the business making money if the answer to
that question is no the next question is
does the business have special value so
that means even though a business has no
profit or no return to owner it could
have value outside the normal realms of
business valuation does it have certain
intangible intellectual property

something that a buyer might want that
doesn’t relate to its current income but
could be very valuable to a buyer if the
answer to that question is no we’re then
left with an asset valuation method look
at the three methods we include here the
first one is depreciated value this is the value you’ll find in a depreciation
schedule it could be an accurate value
but it could be less or more than the
assets are actually worth for example
the government allows us to depreciate
assets at a set rate if the assets
haven’t depreciated and haven’t lost
value at that rate well the depreciation
value is not accurate secondly net
realizable value that’s the value that
we can achieve for the assets in an
orderly sale right now it’s not fire
sale but its net realizable value
available in the marketplace less any
costs of auctioneers or middleman
thirdly we have going concern value this
is the highest value generally that
assets will attract is the value of all
the assets in situ plugged in business

ready to be open tomorrow and
everything’s there that’s required to
operate the business obviously that’s a
greater value than the assets just
sitting there waiting to be sold or not
being utilized now there’s another asset
valuation method that you won’t see
discussed much in the textbooks but it’s
a pretty common sense one it’s called
the cost to create method now this is
fairly logical as well if you’re looking
at buying a going concern business and
someone wants a hundred thousand dollars
for it and you say well I could set one
up next door and be just the same as
that business not get it for 50 if the
two businesses are the same the one that

To get your business valued easily, visit here and for an affordable, professional valuation.

Tony Arena

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