What is a business valuation?

"Business Valuation" is the determination of the value of a company or its parts using various valuation methods and techniques. Here, we look at the economic value, based on the net cash flows and the risks of the enterprise. The 'discounted cash flow method' is often used for this, which looks at future income and costs.

The most common reason for a business valuation is during the transfer of shares in an enterprise. This can be during a takeover, a management buy-out, the purchase of a minority shareholder's interest, business succession, divorce, or inheritance.

In addition, a valuation is useful for establishing economic damage, tax matters, legal proceedings, and for introducing share and option schemes for employees. Business valuation is also becoming increasingly important within financial reporting and annual accounts.

Ultimately, it is all about gaining insight into the true value of a company, so that you can make well-considered choices for the future.