The valuation of a business is both a science and an art. To arrive to a proper value of a privately held company professionals need to follow standards and norms that have been developed by experts in the business valuation field.
Many well intentioned valuation professionals are unable to produce an accurate valuation, because they do not understand the market in which companies operate nor comprehend the changing dynamics of expected rate of returns for given risks. Many so call valuation experts talk about the fair market value of business without understanding what fair market really means.
Fair market value is defined as the price at which the business would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both having reasonable knowledge of relevant facts, and with both seeking their maximum self-interest.
The value of a privately owned business depends on a number of factors including its financial strength and profitability, strength of the industry, competitiveness, dependency of the business on the owner and future viability of the company.
At ETA, we evaluate your business from a buyer’s perspective. We’ll make a diligent effort to understand both you and your business and provide you with a defensible, objective, and concise valuation analysis and set realistic expectation in determining the “Fair Market Value” of your investment.