Valuation is the process of calculating the economic value of a business or asset. The goal of this process is to arrive at a fair market value, but we cannot always know the ultimate price that will be paid for the business or asset. This price depends on a number of factors, including the industry, business sector, method of valuation, and existing economic conditions. The valuation produced by one professional will almost certainly be different than the valuation provided by another professional. At Sunbelt Business Advisors, Greater Bay Area, we are highly capable of producing an accurate business valuation. Santa Clara County & San Jose, CA business owners can utilize our services to get the valuations they need in preparation for placing a business on the market.
Reasons for a Valuation
If a company is going to be purchased, sold, or liquidated, it needs a valuation. In some cases, in order to raise debt, company must provide the value of the company as a whole or its assets. A valuation professional commonly utilizes cash flow models, financial statements, and market analysis to produce the valuation. They commonly examine market valuation multiples, discounted cash flow, and comparable transactions. An adept buyer will also come up with a business valuation for your company. The buyer may use some or all of the methods mentioned above in addition to evaluating your company’s management team.
Valuation for Mergers, Acquisitions & Sales
During an acquisition, merger, or sale, interested potential buyers are searching for the best fair market price of a business on their radar. Factors including financial history, brand recognition, and management play into their perceived return on investment, and are used in the negotiating process. In a buy-sell agreement, assets or equity is transferred between shareholders and/or partners.
Methods of Valuation
There are multiple ways to produce a valuation for business. The three major methods of doing this include income, asset, and market valuation. The process can be complex and involve issues that have not been previously addressed. In order to price the business properly in the marketplace, it is important to have the valuation method applied that will work best for your company.