How Business Valuation Works

The business valuation process may vary by industry, but the core steps are generally consistent.

1. Data Collection

• Financial statements: Prior years’ income and loss statements, balance sheets, cash flow statements, and statements of changes in equity
• General company information: Mission, management, competitive position, portfolio, client base
• Legal documentation: Ownership rights, contracts, licenses

2. Financial Analysis

• Revenue and expense assessment
• Asset and liability calculation
• Cash flow analysis
• Financial ratio analysis

3. Valuation Methods

• Market multiples method: Valuation based on comparable company benchmarks
• DCF method (Discounted Cash Flow): Discounting projected future free cash flows
• Asset-based method: Net asset value assessment based on assets and liabilities

4. Risk Assessment

Evaluation of the company’s financial, operational, and management risks, as well as the impact of external factors.

5. Future Outlook Assessment

• Development of new markets
• Impact of technology and innovation
• Adaptation to economic changes

6. Results Evaluation and Report Preparation

A detailed conclusion describing the approaches used, information gathered, assumptions made, and results reached.