The Realistic Value of Your Business

The subject of the realistic value of your business can be one of the most difficult topics during the exit strategy process. Business owners often feel:

  • Buyers and appraisers are intentionally undervaluing the business
  • The prospective buyer does not really understand the true value of the business
  • The various valuation methods are not realistic ways to calculate value
  • Not enough value is given to intangibles, such as employees, customers, etc.

DIFFERENT VALUATION METHODS

The process of placing a consistent dollar value on your business can be very frustrating. One of the frustrations is the numerous ways that buyers and appraisers use to value a business. Additional irritation arises because some appraisers use two or more valuation methods within the same report. Below are some of the most common valuation methods:

  • EBITDA Method
  • Discounted Cash Flow Method
  • Comparable Company Method of Valuation
  • Comparable Transaction Method of Valuation
  • Asset Accumulation Method
  • Acquisition Debt Value
  • Liquidation Value

It is highly recommended that you begin the process of calculating the current value of your company immediately.

photo credit: Sabala’s Podcast Hotel Podcast Jams Portland 2005 -36 via photopin (license)

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