One of the most important aspects of valuing a business is its financial health. If you are a family-owned business, you might want to take an objective approach. A larger competitor may offer PS100 per contract to purchase your IT maintenance company. The price of this business would be higher than its current value, so a large price for a small business would be low. On the other hand, a smaller company that is struggling might want to sell its small business for PS3 million.
The Philosophy Of Valuing A Business
To value your business, gather all of your financial records for the last three years. Make sure you have your cash flow statement and balance sheet handy. If you have not been in business for three years, you should use a projection model. The earnings number is divided by the shares to determine the value. A high number will indicate a high value. A low number will mean a low price. This method is the most accurate, but it isn’t the only one to use.
A business valuation can be performed in a few ways. There are several methods of calculating the value of a business. There are three main methods: a sales price, a market value, and a net asset value. The purpose of the valuation will determine the approach and assumptions used to determine the value of the business. In some cases, the valuation can be a legal document to be used in litigation or taxation.