Types of Valuations:
Valuations of Small Businesses can vary significantly for many reasons. Type of business, the industry geographical location (local or global) the business operates in and competes in and the purpose of the valuation are just a few of the reasons. Valuations can be formal such as a Computation of Value or a Calculation of Value, or simple industry rules of thumb or based on industry market multiples. Valuation approaches and methods vary based on the type of entity being valued.
VALUATION METHODS APPROACHES AND METHODS
There as three general method and approaches to valuing small businesses:
The Asset-Based Approach is used to determine a value indication of a business’s assets and/or equity using one of more methods based directly on the value of the assets of the business less liabilities.
The income approach is used to determine a value indication of a business’s assets and/or equity using one or more methods where in a value is determined by converting anticipated benefits.
A market-based approach is a general way of determining a value indication of a business’s assets and/or equity using one or more methods that compare the subject to similar investments that been sold.