Business valuations can be complicated and challenging as they involve both mathematical and subjective models. There are many factors that need to be considered when performing business valuations. Transworld M & A specialises in business valuations and can help you determine a fair value for a business for sale or acquisition. Some of the important considerations that come into play when performing business valuations are listed below.
Past sales of similar businesses
By considering what similar businesses have sold for in the past you get a handle of what the market has been willing to pay. Each business is unique but this is still a useful and powerful indicator. Also considering similar businesses currently for sale will give an indication of trend.
Asset value of a business
A business has assets and liabilities and by offsetting the two you get a cold figure that cannot be ignored. A business that is a going concern will be worth more than the net asset value, but this figure gives you a handle on the accounting value of a business.
Past profits are a strong indicator of performance. A profitable business is more valuable than one making losses. Accountants and business professionals often extrapolate profits over 2 or 3 years to arrive at a possible selling price.
Potential & Goodwill
Even if a business is not yet profitable it might have huge potential that would make it more valuable than a profitable business. Potential could exist in inventions, technology, niche markets and many other areas.
When performing business valuations, a professional valuator must consider both mathematical and subjective factors. However, the real value of a business lies in what the market is willing to pay. Even if there is one buyer that is willing to pay more, then that is the value. The team at Transworld M & A can help you find that special buyer or investor,