Business Valuation
What It Means
Business Valuation refers to the method used to establish the market value of a business. There are several methods to value a privately held business, including:
Multiple - Subjective Multiplier factors applied to objective values from a company’s financial statements, such as revenue or EBITDA
Market Comparable - Valuations applied to similar companies in the recent past
Discounted Cash Flow - Discounted Cash Flow represents the current value of a series of future expected payments
Book Value - Value of shareholder’s equity as shown on the company’s balance sheet
Why It’s Important
There are several methods for valuing a business because they each have their own merits depending on the circumstances. Valuing a business is a complicated process. A best practice approach is to compare and consider the results of several valuation methods.