Business valuation should be carried out in several stages. First you need to gather all the information about the object, and also to analyze the reliability of all data collected.
Next you need to analyze and study the market in which the company operates. After that you should consider similar property complexes, which are able to generate income on the market.
Then, you should carry out the calculations through to determine appropriate goals and approaches for business valuation. There are three main approaches used for the assessment of the enterprise: income, cost and comparative.
The income approach involves valuation of a business by calculating the present value of expected profits. Thus, the income of the enterprise is considered as a fundamental factor, which determines the magnitude of value of the business. That is, the greater the income, the higher the cost. The income (expected) is calculated on the basis of the property complex of the business, General economic factors, the development prospects of the company, industry dependency, time, benefit, risks associated with the conduct of the business and profits, past performance of a business, the cost of money on time.
Income capitalization method and the discounted flows are more common and relevant to modern Russian conditions by the income approach. The capitalization method is based on the measurement of efficiency of use of assets to generate an income from them. This method can be used if the forecasted earnings are stable over time and positive, and the rate of income is easily predictable.
Discounted cash flow method is based on their projections, subsequently discontinuity in connection with the Governor at the time, according to the rate of discount which allows to determine the current value of future income.
The comparative approach involves comparing assessed enterprises with similar businesses, which are implemented on the open market on equal conditions. For this approach the sources of information are open stock markets, the takeover market and previous deals with the assets in the enterprise. The advantage of this approach is that the real value will reflect the results of all activities of the company, but the transaction price is the situation in this market.
The cost approach considers the valuation of the company from the perspective of her incurred expenses. Most often, the carrying amount of the assets is not a determination of actual market value. Therefore, the goal of business valuation is a very careful reassessment. Then from the resulting figure must be deducted the present value of liabilities, thereby obtaining the estimated value of own capital of the organization.
After the selected method and conducted the analysis necessary to reconcile the results obtained.
To report on the evaluation of the enterprise, which explains the obtained results and explains the whole procedure of the assessment to the business.