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Valuation Methodologies

The income approach to valuation uses the earnings of a business in order to determine the Enterprise Value. Earnings are usually a major factor of why people want to buy a business.

There are 3 methods to the income approach that we use.

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The market approach to valuation uses the data from past transactions of similar businesses to benchmark against the business being valued.

With all the data sets obtained from past transactions, we compare the ratios and make adjustments in order to make a final determination of Enterprise Value. So while the income approach gives an independent study of value, the market approach combines very relevant market sensitivities to value.

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The asset approach is the last and least effective method to valuing businesses with adequate earnings.

It uses the asset as a base value and determines goodwill by projecting a premium based on how well the asset is used. This approach is useful when there is little to no earnings or in a liquidation situation.

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Business For Sale Resources

Where are FSBO listing websites?

Canada

BusinessSellCanada
A great listing website with a Canada focus is BusinessSellCanada.com. This website specifically caters to businesses for sale by owners within Canada (FSBO). Their listing rates are affordable yet generates a good number of buyer inquiries.

 

Where can I find a full explanation of business terms and concepts?

You can refer to our terminologies page or check out Investopedia for many articles relating to finance, valuations, and strategies. Just enter your questions into their search box.

 

Where can I get other valuable small business advice ?

Visit your local small business association that usually have basic information to your questions. For more technical or detailed expertise, contact us.