Mar 25, 2016

Posted by in Business services, Real Estate | Comments Off on What Is The Process To Value A Business In MN?

What Is The Process To Value A Business In MN?

What Is The Process To Value A Business In MN?

The process of valuating or placing a value on a business in MN or across the United States is a very specific and exacting process, but it is not without some level of subjectivity.

Requires Experience

To determine the value of a business for the purpose of fixing a fair market price, or to discover the value or the company to make an offer, there is always some variation based on the importance placed on different factors of the business.

A professional business advisor with years of experienced in valuating businesses is a real asset to both a buyer and a seller. To complete the process, these professionals will consider the big picture of the business with regards to revenue, industry trends and even the economy, and then also work with very specific information based on the unique attributes of the company.

Types of Valuations

To determine the value of a business, particularly for the seller, it is critical to have this done by a professional that is not emotionally invested in the company or the sale. There are several different options to use in valuation that are selected to reflect the specific type of business that is being sold.

These include:

  • Assets – in this type of valuation, the assets of the company are evaluated. This is the most practical for a retail business where inventory and stock create the greatest value with the business. Assets can also include buildings, property, computers, hardware and other items that are sold with the business.
  • Comparables – similar businesses of the same size and in the same MN market are compared as to their selling price with the business being valuated. This is a good option for a very specific type of business where there are similar businesses in the same market.
  • Liquidation – this is the value of the business if all assets were liquidated. To complete this, the professional doing the valuation will watch for similar assets sold on the market, usually within a specific time frame, to determine what the total value would be for the company.
  • Income – with income valuation the historical information for income is used in a formula to predict future income to set a selling price. This is often used for a business that is not asset based and is unique within a market.

Often when a professional determines the value of a business, either for the buyer or the seller, one or more of these options will be most appropriate to arrive at the final price. Keep in mind there is still some subjectivity, but the understanding of the industry and the markets by the advisor will be a critical factor in keeping it as objective as possible.

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