Business valuation is a procedure whose purpose is to calculate the full value of a business or organization, or a share in them. However, it may be necessary for various reasons. In any case, every leader is faced with the problems of its implementation. Without knowing the value of the business, it is quite difficult to make any informed decisions to sell the owner's rights. In simpler terms, the value of a business is a reflection of its performance.
Instructions
Step 1
Business appraisal should be carried out in several stages. First, it is necessary to collect all information about the subject of assessment, as well as to analyze the reliability of all collected data.
Step 2
Next, you need to analyze and study the market in which this company operates. After that, you should consider similar property complexes that are capable of generating income in the market.
Step 3
Then it is necessary to carry out calculations by selecting methods and approaches for business valuation that are suitable for the set goal. At the same time, there are three main approaches used to evaluate an enterprise: profitable, costly and comparative.
Step 4
The income approach involves assessing the value of a business by calculating the present value from the expected profit. Thus, the income of the enterprise is considered as the fundamental factor that determines the magnitude of the value of the business. That is, the higher the income, the higher the cost. In this case, the income (expected) is calculated based on the property complex of the business, general economic factors, the prospects for the development of the company, industry dependencies, the time of obtaining benefits, the risks associated with running this business and making a profit, past results of doing business, the cost of money depending on time …
Step 5
The method of capitalizing income, as well as discounting flows, are more common and relevant for modern Russian conditions through the income approach. The capitalization method is based on measuring the efficiency of using assets to generate income from them. This method can be used if the projected income is stable over time and positive, and the rate of income is easily predictable.
Step 6
The discounted cash flow method is based on their projections, which are subsequently discounted due to the elongation in time, according to the discount rate itself, which allows you to determine the present value of future income.
Step 7
The comparative approach involves comparing the appraised enterprise with similar businesses that are sold on the open market on other equal terms. For the application of this approach, the sources of information are open stock markets, the takeover market, as well as previous transactions with assets at the enterprise in question. The advantage of this approach is that the real value will reflect the results of all the company's activities, but the transaction price will reflect the situation in the given market.
Step 8
The cost approach looks at the valuation of a company in terms of the costs incurred. More often than not, the book value of assets is not a definition of the real market value. Therefore, the task of evaluating a business is to reassess them very carefully. After that, it is necessary to subtract the present value of liabilities from the obtained indicator, thereby obtaining the estimated value of the organization's equity capital.
Step 9
After the method has been selected and the analysis has been performed, it is necessary to agree on the results obtained.
Step 10
An enterprise appraisal report must be drawn up, which explains the results obtained and explains the entire course of the business appraisal procedure.
