One of the most important actions that business owners should take is to have an accurate idea of the value of their business. There are many different types of valuation models that can be used to determine the value of your business However, a lot of these methods require different quantities of information based on the type of information you have at your disposal.

The market-based method includes, for instance, the comparison of similar companies to get an idea of their value and then using this figure to predict the worth of your business. This is a simple but effective method. However it can be a challenge to use if there aren’t many comparable companies.

A multiples valuation model is a common approach. It determines the value of your company by comparing it with similar companies in your industry that have recently been bought or sold. While this is a helpful comparison, it can be dated quickly since the market’s conditions change frequently.

Finally, the asset-based valuation method is a bottom-up evaluation which examines your business’s physical assets such as equipment inventories, patents and property and goodwill to find its value. This is a useful method of valuation that you can use when your company has lots of assets, but not a profit.

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