How to Value a Company

There are numerous situations that would require you to value a business, including:

  • Selling a stake in your business to investors
  • Executing a buy/sell agreement
  • A merger and acquisition with another company
  • Divorce litigation
  • Buying out a partner

Valuing a business is an uncertain science that requires precision. The valuation has real-life consequences, so it would need to be as correct as possible, even when reasonable people can reach different conclusions. Mistakes can cost you money, either by leading to a lower valuation or by forcing you to pay more than a business is worth.

There are a number of methods that experts use to value a business, including:

  • Discounted cash flow – figuring out the future cash flow that the business will generate and applying a present value discount to it
  • EBITDA – applying a multiplier to the amount that the company earns (usually using the earnings from some future point)
  • Enterprise value – adding up the total debt and equity of the business and subtracting out the cash that is not being used in business operations
  • Times revenue – applying a multiplier to the business’ revenues

It is essential to use an expert to place a valuation on the business. Your calculations should be backed up by evidence and concrete accounting methods. In some cases, competing valuations for a business are in dispute and a lawsuit, and you must persuade a judge that your numbers are the correct ones. An experienced attorney could work with experts to come up with an appropriate number and use it in a negotiation or litigation.

Contact an Atlanta Business Valuation Attorney

Battleson Law understands the complex variables that go into business valuations. We can work with you on these issues and other complicated business matters. Call us today at 470.398.1175 or message us online to learn how we can help you.


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