How to Calculate your Business Value Step-by-Step
When determining the value of a business it take a process that involves having different considerations of how the business operates and determining the number of pros and cons that at attached to the business. Business evaluation is done to ensure that the business growth is monitored in relation to value gained over some time and for the purpose of knowing the value of a business which is on sale by comparing it to its competitors in the market. Some of the most common factors that are considered in the value of a business are the asset-base / book value assessment of a business by a certified public accountant. Some factors considered in assessing the value of assets is the asset base of the business and the income made by the business and future possible trends.
When determining the value of a business it involves a process that consists of five steps that will give an actual value. The initial step in business valuation is to prepare the documents that should be needed in the process and determine your reasons for having the business valuation. How you measure the business value and the circumstances involved are some of the valuables involved in determining its value. The second step is adjusting the past financial statements of the business. To determine the future trend of a business you need financial statements of about 3-5 years. In this step balance sheet and income statements are very important in creating a correlation on how much the business makes profits and adjusting the accounting books in order to increase capacity of the business.
The third step is choosing the business valuation method which can fall under three categories which are; asset approach, income approach and marketing approach. A number of factors can influence the method of business valuation as; value of fixed assets, income trends, competitive edge of the business and availability of data of a business cost of capital.Putting into use the method chosen in step three is done, furthermore, using a number of methods is recommendable since some aspects of important business considerations can be realized.
Business value synthesis are the different value that you get from using various methods of business valuation. With the different values which are not definitely the same you make some validation on using one of the values in accordance to the most suitable method.