


Asset Approach values the assets of your business minus the liabilities.
Some of the methods in this approach are the book value, excess earnings method, and asset accumulation method, to name a few.
However, these values usually mean very little to the market value of most operating businesses. For the most part, the asset approach does not properly represent the value of an ongoing business that has positive earnings.
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Your business is worth the present value of the income stream it will bring to an investor. There are several complicated methods, including the discounted future earnings method, as well as several capitalization methods. This approach is also a strong indicator of what a business with positive income is worth. These methods rely on future projections and growth rates to decide what the business may be worth. If that is true, then why do most people multiply or capitalize historical earnings to arrive at a value? Because the assumption is that the buyer will maintain the current income levels, which are a reasonable indication of future earnings.

Simply defined, it is much like a real estate comparable method. Like businesses in size and industry sell for similar valuations. There are two guidelines: the publicly traded company method or the merger and acquired company method (private sale databases). There are many databases we can research to find multiples of gross sales and earnings to compare to your business. This method can be very reliable in most cases and is a strong indicator of value.
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Sell My Business Jacksonville
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