Valuation is the process through which the value or of Business is determined in the market. This is the price of your business which investors are ready to pay you. This process is broadly used in the financial market by investors and economists. The profit of your business and risk which is linked with it both matter a lot in the valuation process. The financial investors evaluate every single aspect regarding your business.
There are some set standards which are used by marketers to prepare the valuation report of the company in which market value, investment values are included. All other values like going concern value, disposition and liquidation values are also evaluated in this process.
The reasons behind preparing this valuation report are different. It can be made for the expansion of your business or it can be prepared while top management asks you for annual or quarterly reports. Generally, the most common reason behind preparing this report to sell the business or Merger with other Company.
Information that you must gather
You must collect and analyze the following information while making this report
• You should clearly define the reason behind making this report
• If you are selling the business then you must explain the reason behind selling this business. Either you were tired while running it or it got flopped.
• You should also need to prepare the whole history of the business like the income statements of the business, the liquidity of business and business growth
• You must prepare the Balance Sheets of past five (5) years which shows the worth of your business.
• You have to do an analysis of your competitors, their prices and their products and services as well
• You have to prepare the chart of monthly payrolls of your employees.
COMMON USED BUSINESS VALUATION METHODS
• Asset-based business valuation methods
• Income-based business valuation methods
• Market-based business valuation methods
• Discounted Cash Flow
• Exit Strategy and Investment Stage
• Combined Method