Business Valuation

What is Business Valuation?

Clothing items, phones, food etc. all have a value attached to them, Similarly, a business too has a value to them at a given point of time. The value of a business will derive mainly from the earnings it will generate into the future for the owners or shareholders of the business.

"Historical earnings (retained profits) of a company, can give a precise value of a business, therefore one can avoid predicting the future cash flows or profits of a company, which are usually derived from valuation models and plethora of assumptions, and hence are not so accurate" So why should one go for a business valuation? By doing a business valuation, one can avoid the mishap by just looking at the earnings already made by the company, in this instance, the value of the company might be low and hence the existing shareholders will lose out on a money-making opportunity by under valuing their shares of the company at the time of sale of the business. Therefore, it is best to go for a business valuation conducted by a professional valuer who will try to value the business in its entirety rather than just looking only on a few aspects.

Who are the other interested parties in business valuation?

There are many parties interested in the process of business valuation, such as :

a) Prospective shareholders of the company
b) Lenders
c) Investors on the existing business line and or for new ventures.

What are the main valuation methods?

There are many business valuation methods, ensuring the entity is a going in concern. They are mainly:

a) DCF Analysis - Discounted Cash flow Analysis
b) Multiples of Earnings Valuation Method
c) Asset-Based Valuation Method

Who does Business Valuation?

A valuer is a professional who carries out inspections in order to help determine the current market value of the business. MNI Accountants comprise of a core of this team to fundamentally understanding the business valuation while each team member contributes deep industry expertise to prepares a sound valuation conclusion.