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 Certified Valuators and Analysts;
- Accredited in business valuations (ABV), a designation awarded by the American Institute of Certified Public Accountants (AICPA).
Business Valuations Methods:
- 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.
- 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.
- The market approach assumes the value of your business and is influenced by historical sales of comparable businesses.
- The average value of a business can be obtained by using the above Three methods.
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