Valuation of business is the process of estimating the worth of the business of an entity, keeping in mind the various synergetic benefits that the entity will be generating in future. Valuation involves various methods and techniques, ranging from simple to complex, in order to compute the fair value of the business. The methods to be adapted for the valuation of business depend on the nature of the business of the entity and various other related factors. Following are some of the methods of valuation of business:
Understanding the business and the purpose of valuation.
Collection of relevant information and documents and discussions with Management.
Performing data analysis and reviewing the information provided by Client.
Selecting the appropriate method of valuing the business, basis the nature of business.
Valuing the business and issuing the valuation report to the client.
– Valuation of business is required at the time of raising of capital, business restructuring, issue of shares outside India, complying the tax and accounting provisions, partition of family business, etc.
– Valuation involves various methods and techniques, ranging from simple to complex, in order to compute the fair value of the business. Methods to be adapted depend upon the purpose for which the valuation is being done along with the nature of business of the entity.
– The valuation report will remain valid only upto the date of the valuation report.
– A Value is computed applying various types of methodologies and basis the various assumptions. Whereas, a Price is the negotiated amount between the buyer and the seller in order to enter into the transaction. The price of the transaction may or may not be equivalent to the fair value of the business.