The Different Types of Business Valuation Methods Explained
Understanding the true value of your business is essential for making informed decisions, whether you're selling, seeking investors, or planning for the future. Business valuation isn’t a one-size-fits-all process—different methods are used depending on the type of business, industry, and purpose of the valuation. Here’s a detailed breakdown of the main business valuation methods to help you navigate this critical process. 1. Asset-Based Approach The asset-based approach focuses on the value of a company’s tangible and intangible assets, minus its liabilities. This method is ideal for businesses with significant physical or intellectual property assets. Key Methods Book Value Method: Based on the net worth of the business, calculated as total assets minus total liabilities. Liquidation Value Method: Assumes the business assets will be sold, often used for distressed businesses. 2. Market-Based Approach The market-based approach compares your business to similar companies that have...