Vantage Business Services
Precise analysis of numerous critical factors
Valuating a business is a multifaceted and crucial process that demands utmost precision and a comprehensive analysis of numerous critical factors. Accurately determining the true value of a business involves delving deep into its financial health, historical performance, growth potential, market position, and intangible assets. Additionally, external factors, such as industry trends, economic conditions, and competitive landscape, play a pivotal role in shaping the business valuation.
The following documents are required for the past three years and current YTD:
Market-Based Business Valuation
A market-based business valuation is one of the simpler business valuation methods, and arguably the most relevant. This rule of thumb approach compares a business to other, similar companies that have sold recently to get a market value. You will want to find recently sold businesses with similar financials in the same industry and market, then use the selling price and financials to calculate comparable pricing multiples.
Asset-Based Business Valuation
An asset-based business valuation focuses on the "book value" of a business. With this approach, business assets are valued and totaled, and any corresponding liabilities are deducted. It is often used in conjunction with other methods of valuation and may be required as part of the due diligence process for some companies.
Struggling or closing businesses with little to no profit may often sell at this value in an asset sale. If the business in question doesn't have the net income to warrant a market-based valuation, then on paper, it's only worth the value of its assets. These assets include furniture, fixtures and equipment (ffe), intellectual property, real estate, production equipment, and inventory.
Income-Based Business Valuation
An income-based valuation approach hinges on projected future earnings and is common in commercial real estate asset valuation. There are two variants of this approach, capitalization of earnings and discounted cash flow (DCF). Both methods aim to calculate the present value of future earnings and give buyers an expected ROI and risk assessment.