|
|
Like this article? PLEASE +1 it! |  |
|
Determining Value
Written by: Start Your BusinessArticle Overview: A realistic business valuation requires more then merely looking at last year's financial statement; it requires a thorough analysis of several years of the business operation and an opinion about the future outlook of the industry, the economy, and how the subject company will compete.
 |
Free Download - Lease Equipment By Start Your Business |
Determining Value
Determining Value
A realistic business valuation requires more then merely looking at last year's financial statement; it requires a thorough analysis of several years of the business operation and an opinion about the future outlook of the industry, the economy, and how the subject company will compete.
Most people believe that a business should be sold for Fair Market Value. The term Fair Market Value is defined by the IRS at Rev. Ruling 59-60 as follows:
"the price at which the property would change hands between a willing buyer and willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts."
There are a number of different methods to determine a fair and equitable price for the sale of the business. The following lists a few methods to determine the price:
* Capitalized Earning Approach — This method refers to the return on the investment that is expected by an investor.
* Excess Earning Method — This method is similar to the capitalized earning method, except that it splits off return on assets from other earnings.
* Cash Flow Method — This method is usually used when attempting to determine how much of a loan the cash flow of the business will support. The adjusted cash flow is used as a benchmark to measure the firm's ability to service debt.
* Tangible Assets ( Balance Sheet) Method — This method values the business by the tangible assets.
* Value of Specific Intangible Assets Method — This method is based upon the buyer's buying a wanted intangible asset versus creating it. This method also takes into consideration valuing the goodwill of the business.
Amendments to Small Business Protections under the Trade Practices Act
Incorporating Training Allowances into Compensation Packages
Choosing an Outbound Call Center Service
How do I determine if a business of my size is covered by the EEO laws
Why Choosing The Right Membership Model Is Critical To Business Success
Article Tags:
|
About the Author: Start Your Business RSS for Start Your's articles - Visit Start Your's website  Click here to visit Start Your's website   Intellectual Property FAQs Export Working Capital Borrowing Money Leasing Checklist StartUp Costs |
Related Forum Posts
Share this article with your friends. Fund someone's dream.
Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.
by: 
The Office Bully
Important "Lessons Learned” For Leaders, According To Your Strategic Thinking Business Coach
Direct Sales Business Pursuit of Abundance
Never Give Up! The Power of Determination 
Leadership Essentials
Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!
Five Ways to Show Honest Appreciation
4 Steps To Hypnotize Your Business Prospects
Are You Fulfilled
Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.