Why is Business Valuation necessary & it’s 6 Steps to company valuation?

Business valuation is the process of determining the economic value of a business or company. There are a number of methods that can be used to valuate a business, and the most appropriate way depends on the specific business being valued. 

The three most common methods of business valuation are the:

1. Income approach
2. Market approach
3. Asset-based approach

The income approach estimates the future economic benefits of a business by discounting the expected cash flows to a present value. The market approach estimates the value of a business by analyzing comparable sales of similar businesses. The asset-based approach estimates the value of a business by analyzing the balance sheet to determine the fair market value of the assets. 

Every business has two types of value:

1. Intangible: Intangible assets are more difficult to value. These are the non-physical assets of a business that contribute to its value but are not easy to see or touch. Examples of intangible assets include things like intellectual property, goodwill, and brand equity. 
2. Tangible: Tangible assets are the physical assets of a business that can be seen and touched- such as cash, inventory, land, and buildings. The value of these assets is relatively easy to calculate. 

The difference between the valuations of these two types of assets is often the reason why businesses fail or succeed. This article will explore what business valuation is and how important it is to valuate a business correctly. 

Business valuations are essential for a number of reasons. They can be used to determine the value of a business for sale, for tax purposes, for litigation, or for estate planning. A business valuation can also help a business raise capital or get a loan.

How to Valuate a Business in 6 Steps

1. Book Value
2. Discounted Cash Flows
3. Market Capitalization
4. Enterprise Value
5. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
6. Present Value of a Growing Perpetuity Formula

ASC Group is India's leading company valuation firm. We have a team of experts who are experienced in all three methods of business valuation. We will provide you with the best possible estimate of your company's value. Contact us today for a free consultation.