The Basic Methods Of Business Valuation

If you are planning sometime soon on selling your business in Seattle, you will need to prepare a business valuation. This is an essential component of your overall exit plan. It is one way you can prove to potential buyers the worth or value of your company. By having this matter professionally handled, you can arrive at a figure that will accurately reflect your company. This, in turn, will prove attractive to buyers while ensuring you set and even receive the best price possible.

How Much Is your Business Worth?

A business valuation determines the worth of your business. It accomplishes this by taking into consideration several different but related factors. These are drawn from your present balance sheet. It is also important to factor in the current state of the economy in your city, state, country, and other nations. It depends upon the extent or type of business transactions in which your company or business is involved. The methods to discover how much your company is worth vary, although the economic principles are the same.

Three Methods of Business Valuation

Business valuation approaches tend to be divided into three different types. These are:

1. The Asset Approach: In turn, divided into both a “going concern asset-based approach” and a “liquidation asset-based approach,” this method views your Seattle business regarding its assets and liabilities. Also known as a cost-based method this approach lists the assets and subtracts the liabilities to arrive at its net business valuation.

2. Earning Values Approach Income Approach: The economic principle of “expectation” is this approach’s ruling principle. In calculating the worth of your business, the idea is to do some forward casting. In other words, the idea is to determine what a buyer can expect regarding future cash flow. The basis for this prediction is the normalization of a businesses’ previous earning record. A variation on this particular approach is the Discounted Future Earnings.

3. The Market Approach: The business valuation using this method utilizes a comparison method. To find out the worth of your company, it compares your business with other similar ones recently placed on and sold in the real estate market.

In Seattle in general, business brokers utilize a combination of the above approaches to determine the fair market value of your property.

A Business Valuation Requires a Professional

Valuing a business does not claim to be an exact science. The various methods can result in very different results. However, if you want to prepare your business for your grand exit, it is important to hire an expert in the field. By hiring a professional in business valuation, you are preparing to take the first steps towards having a successful sale of your Seattle business.

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