Different Types of Company Valuation Models

One of the most important actions that business owners can take is to obtain an idea about the value of their company. There are a variety of different types of valuation models that can be used to help determine the worth of your business however, many of virtual data rooms these methods require varying quantities of information based on the type of information you have to work with.

For instance, the market-based valuation method is based on looking at similar companies to get a sense of what they are valued at and then using that number to predict your own company’s worth. This is a straightforward but efficient technique. However it can be difficult to use if there aren’t many similar businesses.

Another method is to use a multiplication valuation model that determines the value of your company by comparing it to similar companies in the industry that have been sold or acquired recently. This is a useful benchmark however, it can become outdated when market conditions change.

The asset-based method is a bottom up analysis that makes use of your company’s physical assets such as inventories, equipment patents, property and other assets to determine its value. This is an effective method of valuation that you can employ when your business has a large amount of assets, but no profit.