Valuation Methods Explained
Introduction
What you'll learn in this guide
Understand different valuation approaches and when to use each method. This guide demystifies business valuation for founders and finance professionals.
Asset-Based Valuation
Calculate business value based on net asset value (assets minus liabilities). Best for asset-heavy businesses.
Income-Based Valuation
Discounted Cash Flow (DCF) and capitalization of earnings methods. Best for businesses with predictable cash flows.
Market-Based Valuation
Compare your business to similar companies that have been sold or are publicly traded. Use multiples like EBITDA, revenue, or book value.
Choosing the Right Method
Select the valuation method that best fits your business model, industry, and growth stage. Consider using multiple methods for triangulation.
Key Takeaways
- Understand the main valuation methods
- Choose the right method for your business
- Use multiple approaches for accuracy
Conclusion
Valuation is both art and science. Use multiple methods, understand their limitations, and seek professional advice when needed.