There is a variety of methods used to determine the value of a going concern. Each method tells you something about the company; some methods reflect its past performance, while others are based on future expectations for the business. It is also important to consider the value of the assets (tangible and intangible) and the shareholders’ equity.
That is why it is important to apply all the methods that contribute to the business’s value, with the goal of obtaining a value that is as representative as possible by considering different angles. It is usually appropriate to weigh the results obtained from each methodology.
Below is a list of some of the most commonly used methods for valuing going-concern businesses:
Once the business’s value range has been obtained, different industries offer indicators or benchmarks that can serve as a reference for validation. For example:
