If you decide to increase the value of your enterprise, which is the goal of every businessman, it would be a good idea to determine this very value for a start. The most famous approaches to business valuation are comparative, profitable and costly.
It is necessary
Financial statements, market data
Instructions
Step 1
If there is a sufficiently formed market, then the value of the company can be estimated by how much it can be sold for. Try to find on the market the fact of selling an enterprise similar to yours. The fixed selling price will be the approximate value of your business. The main advantage of this approach is its focus on actual market-adjusted buy and sell prices.
Step 2
Does the income approach take into account one of the most important indicators? the ability of the business to make a profit. Using this approach, you can determine the market value of the company, taking into account the expected future earnings. To determine profit for a specific period of time, it is necessary to analyze historical data and make a forecast, taking into account all the risks that may disrupt the company's plans to receive the expected income.
Step 3
The property or cost approach will allow you to assess the value of the business in terms of the costs incurred by the founders. In accordance with this approach, the value of an asset is determined by the amount of costs that must be incurred in order to replace or reproduce it (the asset). The advantage of the cost-based approach is its reliability, since only the actual value of the company's property is taken into account. To evaluate the company, analyze all the items on its balance sheet, add up the value of assets, and then subtract the balance sheet liability (current and long-term debt).
Step 4
A comparative approach sometimes does not allow to adequately assess the value of a company, since the market quite often reflects speculative sentiments, which forces us to analyze stock quotes over a long period (3-5 years). The income approach is not able to take into account all possible risks, and the cost approach does not take into account the development prospects. Therefore, when evaluating a business, it is best to combine them - in this case, it will be possible to most accurately assess the value of the company.
