Valuing A Business
Front Range Business, Inc. acknowledges that business valuation is as much an art as a science. While business valuation does employ standardized formulas and methods to calculate value, assumptions are made that are based on experience in the marketplace and familiarity with similar businesses. This process includes the selection of the most appropriate risk and return variables, and the most appropriate comparable sales. In this way, the collected data and applied expertise lead to the best calculation of value for a specific business.
The value of a business is based on three things: what it owns, what it earns and its risk versus return.
Beware of “Rules of Thumb”
There are many different rules of thumb available, but in most cases they do not give an accurate value of a business because they are based on an “average business.” Even though most industries have one or more such rules, there are not any “average businesses.” Each business is unique and a particular rule of thumb can be off by as much as 100% or more. The business valuator will be able to decide what is the most relevant information about a business and then make an informed decision about its value.