Ways to Value Your Business
There may be certain occasions when you need to value a business. For instance, you may want to buy out a minority shareholder or carry out another corporate transaction. You may need to place a worth on the business for estate planning or family law purposes. Regardless of the reason, valuing a business is not always a straightforward calculation. There are a number of ways to come up with a business valuation.
The most common business valuation method is discounted cash flow. You would estimate the amount of money that the business would generate in the future and discount it by a present value factor. The challenges are both estimating future growth and determining the right discount rate.
Accountants may use the enterprise value for a business. This calculation involves taking the business’ debt and equity, and then subtracting out the cash that is not used for business operations. This valuation method can better account for a business’ unique capital structure.
Companies could use the EBITDA method to value a business. EBITDA stands for earnings before taxes, depreciation, and amortization. The accountant would choose a multiplier to apply to the amount of money that a company earns, with the assumption that it would continue to earn money in the future. EBITDA often uses a future year’s earnings as the baseline for the calculation.
Reasonable people may differ on both the method that is chosen to value a business and the individual inputs to the model. Business valuation is often in dispute in a lawsuit.
Contact a Boca Raton Business Valuation Attorney Today
The attorneys at Rubino Findley PLLC work with businesses on complex matters, providing seasoned and measured counsel in routine and difficult situations. To speak with an attorney, call us today at 561.220.0741 or send us a message online.