Business valuation process

Business valuation process Business valuation is the process of determining the economic value of your company or business.

The process is carried out by the professional and experienced business valuable services in India typically when the company is looking to sell all or a portion of its operations or intending to merge with or acquire another company. The valuation is about determining the current worth of a business, using specific measures and evaluating all its aspects.

Expert consultants include an analysis of the company’s management, its capital structure, future earnings prospects or the market value of its assets. The tools used for valuation can vary among organizations, businesses and evaluators. The most common approaches of valuating the business employed by leading business valuation services in India; include a review of financial statements, discounting cash flows models and doing comparisons of similar companies.

Here are the processes of business valuation carried out by professional valuating companies in India: 1. Why is the business being valued: The very first step in the valuation process is to determine the reason the valuation report is for. There will be different approach of valuation for every purpose and based on it the blueprint of the valuation is chalked out to carry out further process.

2. Gathering of information: The financial information is of upper most importance to most business valuations, whatever the end purpose is. The valuation specialist gathers 3 -5 years of income statements and balance sheets. If the property is leased, the lease agreement is required along with any agreement or contracts the business has with clients. The information required is based on the ultimate use of valuation. Public company valuations require extensive information and a small business requires less.

3. Recast financials: Most small to medium business organizations are run by owners to minimize taxable income. To determine the actual profitability of such businesses, the valuation experts adjust the financial statements. They develop an add-back schedule that will allow a prospective purchaser and their financial advisors the ability to recognize the actual operating profits of business before personal expenses and salaries of business owners.

4. Selecting business valuation approach: Most business valuation methods fall under one or more of these basic approaches that includes asset approach, income approach and market approach.

5. Application of the business valuation method: Once the data is assembled and business valuation approach chosen, the result should produce accurate, precise and easily justifiable results.

6. Conclusion of the business valuation: The report of business valuation should in a nut shell explain the processes and justifications that have been applied to valuation and reasons for

valuation. As, various business valuation methods chosen produce different results, concluding the business value requires that these differences are reconciled. Business valuation specialists normally use a weighing scheme to arrive the business value conclusion.

The weights assigned to the results of the valuation methods serve to rank their relative importance in reaching business value estimate. With no specific rules to determine the weights, experts use number of guidelines when selecting weights for the conclusion of their business valuation.