The purpose of the valuation determines the standard of value, valuation approach or approaches used, and assumptions used in calculating value, all of which have an impact on the value conclusion.
Fremont, CA: The business valuation process consists of a series of steps to be taken in a specific order, various formulas for calculating value, and accounting guidelines dictating the rules to be followed in specific situations. To be carried out correctly, this process necessitates a great deal of experience and knowledge.
There are some essential steps to value a company:
Engaging the Services of a Business Valuation Professional: Making the right decisions requires the experience of a seasoned business valuation professional. Because each company is unique, as are the reasons for and circumstances surrounding each valuation, the experience that a good business appraiser brings to the task is crucial in arriving at a value that is both defensible and accurate.
Understanding the Goal of the Valuation: The purpose of the valuation determines the standard of value, valuation approach or approaches used, and assumptions used in calculating value, all of which have an impact on the value conclusion.
Determining the Value Premise: The purpose of the valuation and the basis of value determine which premise of value is used: going concerned or orderly/forced liquidation. The former assumes the continued operation of the business and use of the business assets; the latter assumes the operation or sale of the assets individually or as a group. Another example is mergers and acquisitions; in an M&A transaction, the purchaser may realize advantages that increase the value of the acquired business above its fair market value. This may result in a significantly higher premise of value than for a going concern or orderly/forced liquidation premise.
Determining the Basis of Value: One must consider the type of value being measured as well as the perspectives of the transaction's parties. Is the value the transaction price between a willing seller as well as a willing buyer or the current owner's investment value? The basis of value is frequently specified by regulation, law, or contract and maybe the reason for pursuing the valuation.
