Whether you have a business for sale or want to acquire a business, you should do valuation of your business. If company valuation is done properly, you will be able to ask fair market price and increase the chances of getting deal closed quickly. There are various methods used for business valuation such as Capital Asset Pricing Model, Modified Capital Asset Pricing Model and Weighted Average cost of Capital. We have explained here few business valuation method using Income approach to help you understand it.
Valuation based on Income approach demonstrates how to value a company based on its ability to generate desired income or economic benefits to its owners. The financial benefits such as discretionary cash flow or net cash flow is multiplied, discounted or capitalized to perform business valuations. Proper selection of capitalization rate or discount rate or valuation multiples will be the key for effective valuation of your business. Continue reading “Business Valuation Methods – Income Approach”