Different Types of Company Valuation Models

Being able to clearly see the value of your company is one of the most important actions for business owners to consider. There are many different types of valuation models that can be used to help determine your business's worth, but many of these methods require varying amounts of information based on the type of information you have to work with.

The market-based approach is, for instance, the comparison of similar companies to get an idea of their worth and then using this value to determine the value of your company. Although this is a straightforward and effective method however, it can be a challenge when there aren't enough comparable businesses in the marketplace.

Another common approach is to use a multiples valuation model that determines the value of your business by comparing it to similar companies in the industry that have been sold or acquired recently. While this is a great reference, it could become outdated quickly as market conditions change frequently.

The asset-based valuation method is a bottom up analysis which examines your business's physical assets, such as equipment, inventory, patents, goodwill and property in order to determine its value. This is a valuable method of valuation which can be utilized when your company has more assets than profits.




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