The following criteria can be taken into consideration while determining your business
Income Valuation
In this very first step we anticipate future income of the business. A formula is then applied that discounts future earnings to present day levels to come up with a fair market price for the business.
Asset Valuation
According to the asset valuation method, the total value of a business is the sum of all of its tangible parts. However, this method does not include things such as name recognition or customer goodwill that are intangible, yet valuable, to the existing business and potential buyers.
Industry Formulas or Standards
Industry formulas and standards must be carefully reviewed if you choose to use this approach so that you are not undervaluing or overvaluing your business. For example, if the economy is coming out of a recession that hurt your business then your income over the past three years may not be truly indicative of how much your company is worth.
Comparable Sales: another way to value a company is to consider the sales of recently sold companies. This is valuable information because it gives you information about how many potential buyers are willing to pay. However, it is important to carefully compare the comparable sales to your own business and to ensure that your price appropriately reflects the differences in your business and the comparable sales.
Income Valuation
In this very first step we anticipate future income of the business. A formula is then applied that discounts future earnings to present day levels to come up with a fair market price for the business.
Asset Valuation
According to the asset valuation method, the total value of a business is the sum of all of its tangible parts. However, this method does not include things such as name recognition or customer goodwill that are intangible, yet valuable, to the existing business and potential buyers.
Industry Formulas or Standards
Industry formulas and standards must be carefully reviewed if you choose to use this approach so that you are not undervaluing or overvaluing your business. For example, if the economy is coming out of a recession that hurt your business then your income over the past three years may not be truly indicative of how much your company is worth.
Comparable Sales: another way to value a company is to consider the sales of recently sold companies. This is valuable information because it gives you information about how many potential buyers are willing to pay. However, it is important to carefully compare the comparable sales to your own business and to ensure that your price appropriately reflects the differences in your business and the comparable sales.