Being able to clearly see your company’s value is one of the most important actions for business owners to take. There are a variety of different types of valuation models that can be used to determine the worth of your company but a majority of these methods require varying amounts of information depending on the type of information that you have access to.
The market-based method, for example, involves the comparison of similar companies to get an idea of their value and then using this value to predict the value of your business. Although this is a straightforward and effective method but it can be challenging when there aren’t enough comparable businesses in the marketplace.
A multiples valuation model is a common method. It calculates the value of your business by comparing it with similar companies in your field that have recently been purchased or sold. While this is a great comparison, it can be outdated fast as market conditions change frequently.
The asset-based valuation method is a bottom up analysis that examines your business’s physical assets http://www.dataroomtalk.blog/best-ways-to-value-a-company/ such as equipment, inventories, patents and goodwill and property in order to determine the value of each asset. This is a useful valuation technique that can be used when your company has more assets than profit.