What is business valuation?
Posted: Mon Dec 23, 2024 5:39 am
This process can be used to determine how much a business is actually worth. This information is essential for making strategic decisions that can lead a company to take a decisive turn towards its growth and development in the market.
Business owners are constantly interested in knowing how much their business is worth in the market, depending on the competition and the economic environment. However, many times the result of the estimation of the value of a company and the calculation of the real value can be different. This is how the valuation of companies is presented as one of the best tools to know this information for sure.
It is very important to find out what this topic is about, as well as the valuation methods that exist. It is an essential tool to improve the performance of any organization, and make a significant difference compared to the guidelines dictated by the market.
Business Valuation: What is it?
It is a process that consists of several actions, which serve to determine the economic value of a business, and which is used for various purposes . To do this, different elements that are part of the company are quantified and analyzed , such as its assets, its commercial activity, its competitiveness, its growth rate and other relevant characteristics.
Essentially, business valuation is a comprehensive financial analysis used to determine the reality of the organization, over a specific period . Technically, it is not only required by those who are in charge of a company or those who are looking to acquire one, but also by those who lead an investment project.
As for the most common reason for making an appraisal, it is usually the cpa email addresses purchase or sale of a business, in whole or in part, as explained by financial specialists Gustavo Tapia , Carlos Aire , Mauro De Jesús , Mario Perossa and Hernán Rouby in the book Valuation of companies. A practical and dynamic approach (2012). They add that it also applies when seeking to increase capital or when a generational succession or inheritance occurs, and even when crises arise.
Keep reading and find out what business economics studies .
How to value a company?
This activity involves technical and financial work, which requires a lot of detailed research. In order to carry out the valuation, it is important to have as much historical financial information as possible available, in order to adjust the result to the reality of the company.
Most companies do not usually carry out a professional appraisal. They generally consider it when they are faced with a merger, acquisition or sale process. However, the results of this practice provide important input for making strategic decisions, so it is essential to know which methodologies the specialists rely on.
Business Valuation Methods
The business valuation process is achieved through the application of various methodologies that allow this estimate to be obtained. However, it is very important that the expert who carries out this work has solid knowledge and skills to deal with the particularities of each company.
In order to choose the most appropriate model for valuation, it is necessary to have analytical support for the search for investors, strategic partners or buyers. Likewise, it must be possible to identify the sources of added value and leverage for the business to grow. In addition, it must evaluate the current level of profitability based on the value of the company.
Based on these precepts, the professor and financial expert Pablo Fernández , sets out in his book Business Valuation. How to Measure and Manage Value Creation (2001), the following valuation methodologies or methods:
Based on the balance sheet or equity value. The business's assets are considered to calculate its value, and the accounting balance is essential. The history and the evolution that the company may have in the future are not considered. Some of the most commonly used methods are the adjusted value, the actual net assets, the liquidation value, the substantial value and the book value.
Business owners are constantly interested in knowing how much their business is worth in the market, depending on the competition and the economic environment. However, many times the result of the estimation of the value of a company and the calculation of the real value can be different. This is how the valuation of companies is presented as one of the best tools to know this information for sure.
It is very important to find out what this topic is about, as well as the valuation methods that exist. It is an essential tool to improve the performance of any organization, and make a significant difference compared to the guidelines dictated by the market.
Business Valuation: What is it?
It is a process that consists of several actions, which serve to determine the economic value of a business, and which is used for various purposes . To do this, different elements that are part of the company are quantified and analyzed , such as its assets, its commercial activity, its competitiveness, its growth rate and other relevant characteristics.
Essentially, business valuation is a comprehensive financial analysis used to determine the reality of the organization, over a specific period . Technically, it is not only required by those who are in charge of a company or those who are looking to acquire one, but also by those who lead an investment project.
As for the most common reason for making an appraisal, it is usually the cpa email addresses purchase or sale of a business, in whole or in part, as explained by financial specialists Gustavo Tapia , Carlos Aire , Mauro De Jesús , Mario Perossa and Hernán Rouby in the book Valuation of companies. A practical and dynamic approach (2012). They add that it also applies when seeking to increase capital or when a generational succession or inheritance occurs, and even when crises arise.
Keep reading and find out what business economics studies .
How to value a company?
This activity involves technical and financial work, which requires a lot of detailed research. In order to carry out the valuation, it is important to have as much historical financial information as possible available, in order to adjust the result to the reality of the company.
Most companies do not usually carry out a professional appraisal. They generally consider it when they are faced with a merger, acquisition or sale process. However, the results of this practice provide important input for making strategic decisions, so it is essential to know which methodologies the specialists rely on.
Business Valuation Methods
The business valuation process is achieved through the application of various methodologies that allow this estimate to be obtained. However, it is very important that the expert who carries out this work has solid knowledge and skills to deal with the particularities of each company.
In order to choose the most appropriate model for valuation, it is necessary to have analytical support for the search for investors, strategic partners or buyers. Likewise, it must be possible to identify the sources of added value and leverage for the business to grow. In addition, it must evaluate the current level of profitability based on the value of the company.
Based on these precepts, the professor and financial expert Pablo Fernández , sets out in his book Business Valuation. How to Measure and Manage Value Creation (2001), the following valuation methodologies or methods:
Based on the balance sheet or equity value. The business's assets are considered to calculate its value, and the accounting balance is essential. The history and the evolution that the company may have in the future are not considered. Some of the most commonly used methods are the adjusted value, the actual net assets, the liquidation value, the substantial value and the book value.