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Business Valuation Methods

Business Valuation Methods for Start Up Companies

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Business Valuation Methods

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  1. Business Valuation Methods

  2. Valuation Practice Valuation is the practice of estimating a defined monetary value for a single or pooled intangible asset • Valuation processes are performed either for transactional (such as commercial activities) or notational (such as accounting activities) purposes. • Three main approaches to valuation exist (cost, market & income approaches), each of which have specific strengths & weaknesses, and therefore answer different needs

  3. Valuation in practice General • A valuation process is structured in similar manners (tasks), whichever approach (cost, market and/or income) is chosen • The different tasks include for such process • Objective definition • Standard of value selection • Appraised asset description • Valuation date or period selection • Valuation approach(es) selection and related calculations • Results reporting • Always remember that a value is subjective, whereas a price is objective Data collection & analysis

  4. Valuation in practice: Cost approach Cost approach : Measure the value of an intangible asset by taking into account all relevant occurring costs and investments related to the appraised asset • Historic costs : accounting all costs (effective and sunk) directly related to the appraised asset (such as securing, research, development, and licensing-in costs) • Replacement costs : valuing the costs for buying an asset bringing the same utility than the appraised one • Reproduction costs : valuing the costs induced in creating, at the time of the appraisal, a similar asset based on actual knowledge Cost approach is generally used in situations of high uncertainty and limited information exist

  5. Valuation in practice: Market approach • Market approach : Value consists in the price of a comparable asset in a similarmarket transaction • Market approach relates to the quantification and adjustment of pricing multiples in order to create theoretical comparable conditions • Lack of active and transparent market for IP transactions and market dynamics have to be taken into account in the process

  6. Valuation in practice: Income approach • Income approach : Measure the value of an intangible asset by reference to the expected and actualized benefits, incomes or saved costs over the remaining life of the asset • Such prospective-based quantification of financial flows needs to take into account various risk-related factors such as • Endogenous : Extend of IP protection, nature of competition, … • Exogenous : Substitute product development risks, maturity of market, …

  7. Contact below for Business Valuation, Investing, Funding, Appraisals and much more.United States Phone: 844-249-3789Click here to know more :- Business Valuation

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