There are many reasons a business owner may want or need a business valuation, including negotiating a merger or business sale, considering new shareholders, estate planning, or marital dissolution; however, there are only a few accepted business valuation approaches. Often times, owners believe that there is a single way to value their business and are surprised to discover there are several methods through which a valuation is determined. Although choosing the most effective method is typically best left to professionals, business owners can benefit from having a high level understanding of the different methods and how they are used to arrive at a final value. This is especially useful for those individuals seeking to sell their company, since it allows them to identify ways to enhance the long term value of the entity. Below, our Business Succession Planning consultants provide a summary of these various valuation methods. With help from our skilled advisors, your organization’s business valuation can be conducted thoroughly and accurately.
According to leading business valuation associations, there are three major approaches to business valuation:
A fair and objective valuation is necessary for business owners, in order to have the best idea of what their company is worth today, whether for planning or other purposes. Depending on the valuation method applied, there are many variables that should be considered and assessed. For this reason, it’s essential to work with a valuation professional that has experience with your company type and industry. Company owners looking for assistance with business valuations can reach out to the Business Succession Planning representatives at Sikich for advice on different methods or approaches.
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