Business valuation is not easy, because business -is not gold or petrol, which have a clear market value. Here the situation is more complicated, because even appreciating a vegetable tray before buying; you need to consider many aspects. Take the right decision: determine whether you have enough skill to calculate independently the profitability of the transaction or better to turn to professionals who are engaged in the evaluation of business before buying. Well, if you do you ready to do it by yourself, experts recommend the following approach: profitable, market and costly.
When the income approach the value of the company is determined by the expected profit. This method assumes that the buyer does not pay for business more than the current value of future earnings for certain period of time. Applying it, an employer calculates the various options for business development. But in this approach the level of risk is often defined too subjectively. This evaluation method is good if the company’s profit is positive and stable. With a market approach value of the business is evaluated by comparing the sales of companies of comparable size in recent years. The main condition of such a strategy – is a formed market. The cost of estimated company is defined as the product of the ratio of the market price of the company and its analog baseline to baseline of evaluated company. As a baseline typically there are: net income, book value of the enterprise. When choosing matched companies they are guided by the following: industry of the enterprises should be the same, the quantitative and qualitative characteristics of the companies should be approximately equal. When the cost approach the business value is defined by the sum of resource costs for its reproduction or replacement, taking into account wear and tear. This option is the most effective when the buyer is going to compare the costs of acquiring firms with the costs for creation a similar enterprise.
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