Business valuation is an integral part of any corporation or business company and the global financial turmoil has seen new business mergers, company restructuring, share repurchases and acquisitions happening almost everyday. Why ‘value a business’? This must be the most common question popping in everyone’s minds. Business valuation is a necessity and forms the central point of any business sale deal between business owners.
This gives current market value of a business, and is important for the owner who contemplates on selling his business to ask and obtain a reasonable price for the business. Business valuation is also essential for legal clearances
Who needs Business Valuation?
It does not cater to only accounting rather it helps the investors, venture capitalists & business acquirers. Basically a business valuation provides a clear picture of what the actual worth (market value) of the business is to investors or acquirers. Here are the standard method of evaluating a business:
- Hiring a business broker for selling business can be very helpful in business valuation, as the broker will use his professional acumen to value a business. And the standard method for evaluation is asset accumulation wherein the entire business property is liquidated and the liabilities are cleared off to give the net asset value of the business.
- The value of business is also measured through discounted cash flow, which determines the business value based on the cash flow in the company that gives a fair idea of the future cash flow and this free cash flow in the company along with liabilities, equities and risk factors are calculated to give an average business value.
- The other method adopted for business valuation is market value and only quoted companies can approach such a method, where in the market value of the business is calculated by multiplying the prices of shares with price of the shares that are issued. This method of evaluating a business largely depends on investors views on the progress of the company and the capability of the management to make good returns on their investments.
- The price earning business valuation is nothing but the sum of price and earning ratio, which simply means the price of the company share and the stock in the public market is divided by the earning per share. Then the earnings per share is multiplied with the net income of the company, which gives us the final valuation of the business.
Ideally a business broker will be able to determine which of the above mentioned valuation method suits to value a business and even otherwise these evaluating approaches help the process of business sale or acquisition.
Business valuation services from the business brokers Sydney are rated one among the top ‘value a business’ service providers offering valuation of single owner businesses to public invested businesses. You can learn more about their business valuation services at http://www.businessbrokerssydney.net.au/business-valuation/
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