The Details Entailed in Calculating Business Value

Price Value Business Acquisitions Brokers

Calculating business value is a process and set of procedures used by financial market participants to determine the price they expect to pay / receive. Besides estimating the business sale price, the same valuation tools are used often, by the appraiser, for resolving various property and tax disputes, allocating the purchase price of the business to business assets, as well as for many other legal purposes.

A business appraisal report typically begins with a description of the purpose of the business appraisal. What follows next is a description of the national, regional and local economic conditions existing at the date of the assessment. Common source of economic information are the National Bank, government agencies and associations in the field, which can provide useful statistics.

This report is followed by the analysis of financial statements; this generally involves the usual analysis of values, liquidity reports, turnover reports, profitability reports etc., the analysis of trends and the comparative economic analysis.

Normalization of financial statements is another important detail entailed in calculating business value, its key objective being to identify the business’s ability to generate revenue for its owners.

Last but not least, revenues, assets and market approaches are also frequently used in calculating business value.  There are professionals such as that know all the details in selling a business, and can be of great value.