Establishing the Value of a Business: How the Practitioners Do It
The value of a business can be determined in several different ways. The question posed in this study is whether or not the background of a business evaluator tends to influence the method of valuation. Business practitioners of varying backgrounds were surveyed as to methodologies generally employed. It was discovered that accounting and financial consultants tend to prefer present value techniques using discounted cash flows or multiples. Business and real estate agents and brokers look toward appraisal of physical assets or net worth. Small business owners and managers are also likely to apply asset based methodologies. The strategic implication of these findings suggests that care should be taken when selecting professionals to perform valuation services since varying approaches often yield different results.
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