ValuAdder Business Valuation Blog

Any business appraisal, whether prepared by you or someone else, depends on the assumptions made at the outset. Take a look at a well-prepared business appraisal report and you will see that, how the business value is measured as well as the circumstances of business appraisal, are clearly spelled out.

In addition, assessment of business worth requires informed judgement calls from the author – whether the business person or professional appraiser. How you view the business income generation prospects and translate them into the financial forecast makes a difference to the calculated business value result.

Business risk estimation, subject to your judgement, shows up as some pretty important numbers in the form of discount and capitalization rates. These, in turn, affect the outcome of your business valuation calculations.

So, it is not surprising that two appraisals of the same business may give you different results. How different? It is not unusual to see variations on the order of 20 – 25%. Put another way, a well-done business appraisal really establishes business worth within a range of values, not a single number, down to a penny.