The standard measure of value used in business valuation.
What It Means
Business value definition establishes a standard measure of value used to determine the business worth. Choosing a standard of value lets you answer the following question:
For whom is the business value determined?
The most common standards of value used in small business valuation are:
Business valuation depends on how business value is defined
Different standards of value may lead you to different conclusions as to what a business is worth. It is not surprising, for example, that an investor focused on purely financial returns may value a business differently than an entrepreneur looking to fulfill personal goals.
Market-based business valuation methods, such as the ValuAdder Market Comps, generally rely on the fair market value standard. The income-based valuation methods let you choose which business valuation standard to apply.