5 What Not To Do's During Business Valuation Process

There are many do?s and don?ts when performing a business valuation. We shall shed light on some of the don?ts of company valuation process.

• Do not utilize only one method of business valuation, use at least two methods and compare results for accuracy. Ultimately, business valuation numbers ball down to a subjective judgment.

• When valuing private companies do not utilize financial ratios or multiples of public firms with dissimilar characteristics. This is because private companies do not have some information that public companies have available and therefore would require using data of comparable public firms in the same industry.

• If purpose for business valuation is to seek funding from venture capitalist; then do not dwell so much on the product or service, instead, you should high light more of the business in your sales pitch. Investors are more interested in your overall business strategy and capability to run the business on the short and long-run as opposed to just the product sales which may diminish eventually without a good business strategy.

• Do not employ business valuation process that does not comply with the financial accounting standards board. Particularly, if valuation is done for litigation purpose or involves the internal revenue service.

• Do not allow room for error when estimating the revenue growth rate and discount rate as these are very crucial in the process and can lead to large errors in business valuation results if calculated wrongly.

Source: http://www.theboaconsulting.com/5-what-not-to-dos-during-business-valuation-process.html

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