Spokane Business Valuations
We can help you know what your business is worth
We can help you know what your business is worth
Fair Market Value
Let's discuss the fair market value for our purposes. This refers to the amount a buyer would be willing to pay for your company if it were sold in an open market. It's important to note that this is a simplified version of the complex valuation practices that experts specialize in for business valuation services. These detailed reports are often used for IRS inquiries, legal proceedings, and complex financing arrangements, and can cost between $10,000 to $30,000. However, for small business sales, a full valuation may not be necessary, and our simplified valuation methods are generally sufficient for determining your listing price and approximating your eventual sale price.
Three commonly accepted methods for valuing a company are:
Asset Approach
The Asset Approach evaluates a business by subtracting its liabilities from its assets. This approach employs various techniques, such as book value, excess earnings method, and asset accumulation method. Nevertheless, these calculations often hold little relevance to the market value of most active enterprises. Generally speaking, the Asset Approach fails to accurately reflect the value of a thriving business that generates positive earnings.
Market Approach
In simple terms, this method is similar to the real estate comparable approach where businesses of comparable size and industry are sold at similar valuations. The approach employs two main methods - the publicly traded company guideline method and the merger and acquisition company method (using private sale databases). Numerous databases can be researched to identify multiples of gross sales and earnings that can be compared to your business. This approach is often highly dependable and can serve as a robust indicator of value.
Income Approach
The value of your business can be determined by assessing the present value of the income stream it is expected to generate for an investor. This can be accomplished using various complex methods, such as the discounted future earnings method or various capitalization techniques. This approach is a reliable indicator of a business's value, especially when the business generates positive income. These methods rely on projections of future growth and earnings to estimate the business's worth. However, many people prefer to multiply or capitalize historical earnings to arrive at a value because they assume that the buyer will maintain the current income levels, which provide a reasonable indication of future earnings.
