ValuAdder Business Valuation Blog

You can see from our discussion of business valuation that there are a number of ways to determine what a company is worth. In theory the results you get by using the different methods should give you very similar answers. That often is indeed the case, yet the actual business values calculated with various methods are not identical.

So if you apply all three approaches to your business appraisal, you are likely to see three different numbers. If one of the results is out of line with the rest, you may want to revisit your assumptions.

Business people usually expect a crisp number for a business value. One way you can get a single figure that is reasonable is to apply a weight to the results you get from the different valuation methods. The selection of the weighting to do this is one reason professional business appraisers and their experience are sought after.

Correlating the valuation results is a matter of judgment. Hence, it is possible that your conclusion will differ from someone else’s. In fact, it is not unusual for two professional appraisers to disagree on business value within plus or minus 10%. Regardless of the number you pick, your business value analysis must be founded on a set of defensible assumptions. Anything less will likely invite a challenge on the part of the business valuation report reader.

This is especially likely to happen if the business appraisal is reviewed in court or by tax authorities.