3 Types Of Business Valuations

In this segment of Behind The Numbers, Dan Branch explains in brief the 3 Types Of Business Valuations. Watch for the other 3 videos in this series as he explains the 3 methods in greater detail.

Hey there Dan Branch with IAG Forensics and Valuation. We’re a forensic accounting firm which means we work with litigation matters which can be complex corporate litigation which can include family law matters. I wanted to talk with you a little bit today about business valuation fundamentals. What is a business valuation? Ultimately, we’re trying to figure out the value of
a company at a specific point in time and that could be as of today that could be as of a date in the past but we’re trying to figure out what is the value of a company that one of the parties has an ownership in.

So we’ll go over the 3 Types Of Business Valuations in brief. One of the ways to do it is what we call an income approach. Another way is what’s called a market approach and the third way is typically called an asset approach. These are the three typical ways that we look at valuing a company.

Under an Income Approach we’re looking to at the cash flows that the business is generating but also the risks related to those cash flows especially the ones that are in the future and from that we try to determine a value.

The Market Approach is when we look at transactions of either similar businesses in the market we can also look at stocks of publicly traded companies both hopefully to get an indication of the value of the company that we’re looking at.

The third way is an Asset Approach where you’re looking at the assets of the company and trying to figure out how those assets that are on the books how they relate to the value the company as of today or whatever time you’re looking at.

So again this is just the fundamentals of business valuation. The 3 Types Of Business Valuations are an income approach a market approach and an asset approach.

Again Dan Branch with IAG Forensics & Valuation and I’ll bring more information about some of those methodologies in more detail

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Dan Branch

Dan Branch is a graduate of the U.S. Naval Academy, has an MBA from Emory University’s Goizueta Business School, is a Certified Public Accountant (CPA), holds the Accredited in Business Valuation (ABV) certification from the AICPA, and also holds the Accredited Senior Appraiser (ASA) designation in business valuation from the American Society of Appraisers, and has over fifteen years experience in various types of financial advisory and business valuation engagements.

1 Comments

  1. Rhonda Sterrett on June 15, 2022 at 5:00 pm

    This is good information for a business owner that is looking to sell their business or transition out of the business in the future.



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