What’s my business really worth?

Whether you're buying an existing business or selling it to an outsider, you will require a business valuation that establishes a realistic and fair value of the business. This value will be an important starting point when it comes to the transaction.

Business valuation is more of an art than a science. There is no right or wrong answer when it comes to business valuation. Though there are various models available, inputs to those models are based on judgement and that comes from hands-on experience. Business value estimated using any of the available models becomes focal point to put a price tag to any business.

Valuation is subjective in nature and depends heavily on the correctness of the assumptions made by the valuator. Hence it is quite easy for biases of the valuator to creep into his/her valuation. For example, if a valuator likes a company very much then he/she may be very optimistic about the future potential of that company. Similarly, if he/she had some bad experience with a company then he/she may have pessimistic view about the future of that company. Public news about a company can also have some influence of its valuation. To avoid such biases in valuation, one should use multiple methods of valuation and an independent valuator.

DBA Business Advisors is an expert in the business valuation and is happy to offer the best services for most competitive prices taking into account all the requirements and expectations of every client. We use a variety of business valuation methods to determine a fair price for your business, some of the methods are briefly explained below.

Asset-based approaches

This business valuation method sums up all the investments in the business. It is widely used when it comes to liquidating a business. There are two distinct ways of calculating the value under asset-based approach, either it lists the business net balance sheet value of its assets and subtracts the value of its liabilities or it determines the net cash that would be received if all assets were sold and liabilities paid off.

Market value approaches

Market value approaches to business valuation attempt to establish the value of your business by comparing your business to similar businesses that have recently sold. Obviously, this method is only going to work well if there are a sufficient number of similar businesses to compare.

Discounted Cash Flow (DCF) approaches

The DCF approach is widely accepted valuation method as it is based on the idea that a business's true value lies in its ability to produce wealth in the future. It measures the value of a company by estimating the expected future cash flows, and then “discounting” those future cash flows by the buyer’s required rate of return in order to determine their present value. DCF allows the valuator to take into account any short to medium term expectations and input various valuation considerations directly in to the cash flow or the rate of return. DCF quantities most of the subjectivity involved in valuation.

Although the Discounted Cash Flow approach is the most popular business valuation method, for most businesses, we believe that some combination of business valuation methods will be the fairest way to set a selling price.

DBA Business Advisors is an expert in the business valuation and is happy to offer the best services for most competitive prices taking into account all the requirements and expectations of every client and assist through

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