Methodology

Business Valuation Methods

Our business valuations are designed to be easily understood by owners, professional advisors, and courts.

The most commonly - used methods are:

  • Capitalised Earnings (V = E / R) where V=value, E=earnings level, and R=capitalisation rate). Care must be taken that the cap. rate used is appropriate to the chosen earnings level. This is a straightforward approach using simple arithmetic, is readily understood, and well supported by case law.
    Warning: - 'simple' is not 'easy'.
  • Direct Market Data - "a method of appraising closely held businesses that uses information on actual sales of other closely held businesses to estimate the value of the business being appraised".
    Often the most persuasive method if comparable sales information is available. This may be available from industry associations, franchisors, or BizStatsā„¢.
  • In a limited number of cases notional realisation of assets, discounted cash flow, excess earnings, or multiple of discretionary earnings may be preferred as the most appropriate method.

Business Valuation Methods