Different Types of Company Valuation Models
Being able to clearly see your company’s worth is among the most important steps for business owners to take. There are many different valuation models you can use to assess the value of your business. However each model needs a different amount of information, based on the data available.
For example, the market-based method is based on looking at similar businesses to get an idea of what they are valued at and then using that value to estimate your own company’s worth. This is a simple but efficient method. However it can be challenging in the absence of comparable companies.
A multiples valuation model is another common approach. It calculates the value of your company by comparing it to similar companies in your field that have recently been sold or purchased. This can be a useful reference, but it can quickly become outdated as market conditions change.
The asset-based method is a bottom up analysis that takes your business’s physical assets, like equipment, inventories, patents and property to determine their value. This is an effective method to determine the value of your assets that you can employ if your company has a large amount of assets, but no profit.
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