Business Valuations And Determining The Fair Value

People seek business valuations for a variety of reasons. Often, triggered by a court order in divorce proceedings or to settle a dispute. Valuations can also be obtained in anticipation of buying or selling your business to a third party.

In today’s podcast, Ryan Moore, a manager at Riney Hancock CPAs, tells us about the methods used to determine the fair value of your business. Someone with the right expertise and competence such as a CVA or ABV should conduct your valuations.

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Two well-known professionals in this field are:

  • Certified valuation analyst (CVA), accredited by the National Association of National Association of Certified Valuators and Analysts;
  • Accredited in business valuations (ABV), a designation awarded by the American Institute of Certified Public Accountants (AICPA).

Business Valuations Methods:

  1. The income approach, which assumes the value of your business, is a function of the economic benefit of the business. Commonly used for service based businesses.
  2. The asset approach, which assumes the value of your business, is calculated by the assets owned by your business. Commonly used for businesses that are investment oriented.
  3. The market approach, which assumes the value of your business, influenced by historical sales of comparable businesses.
  4. A combination of the first three methods may be used to come up with an average value of your business.

Tune in for more.

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