GMC Blog
Business Valuation: The big 3 approaches
It is said that business valuation is both art and science. The art part comes from the valuators experience and professional judgement. The science comes from the approaches and methods used in calculating the value. Today we want to focus on the science part.
There are three (3) main approaches to valuations: Asset, Income, and Market. Under these three (3) approaches, there are various methods. Let us look at each approach in more detail.
Business Valuation: Financial Statement Adjustments. Why do they matter?
After the financial information is received, the valuator must “spread” (prepare a year by year format) of the financial data. Then we can begin reviewing, analyzing, and comparing the subject company to itself and the industry. Often, there is a need to adjust or “normalize” the company's financial information to make the financials’ reflect the company’s true economic position and for comparability purposes to its industry peers.
Business Valuation: Why businesses are appraised
The purpose of the valuation impacts the valuators process. A valuation in divorce for example can vary by state, county, and locality depending upon prior case law in effect. Valuing a minority interest may mean fewer adjustments can be considered. Is there a need to separate personal goodwill from enterprise goodwill? All of these things and many more need to be considered before proceeding with a business valuation and working with a knowledgeable expert can help in the process.