Model for express assessment of company value. Basic approaches and methods for assessing the value of a company Methods for assessing the market value of an enterprise

Business valuation involves carrying out a certain, rather labor-intensive process that helps the owner determine the value of a company, firm or certain enterprise. It may be needed in different situations. business may be required in one case or another, since the manager must know this indicator in order to make decisions related to the sale or acquisition of property rights. We can say that such an assessment represents the result of the work carried out by the company throughout its existence.

Peculiarities

Estimating the value of a business is a concept that refers to the implementation of certain tasks.

Initially, it consists of analyzing the controlling stake in an enterprise or company. Solving this problem allows you to get the correct and most clear idea of ​​the price of the entire business.

After this, an assessment of the block of shares, called minority, is carried out. The property complex is also assessed. In this case, business assets are given Special attention. These include various buildings, structures, networks, vehicles, land, equipment. In addition to property, the company’s financial routes are also assessed. In addition to all of the above, the market condition is also determined, as well as the discount condition. This process is commonly called the valuation of a company's shares listed on the market.

Business as a commodity

The valuation of a business is also carried out under the condition that it is perceived as a product. When opening a company, a certain capital is invested in it, which must be returned in the future. Moreover, the object of business valuation, be it a company or an enterprise in any field of activity, must make a profit, otherwise there is no point in founding it. Initially, it is unknown how much income will be received, so opening any business is a risky undertaking. However modern methods Business valuation estimates allow you to obtain advance information about future profitability, after which you can make a final decision.

The business itself represents a certain system that can be implemented within the market framework as a separate element, a whole complex or a subsystem. A product can be called either a whole enterprise or its individual elements. A lot of external and internal factors affect the level of profitability and needs of a particular business.

External ones are usually considered to be unstable in the country, which happens quite often. This causes a certain instability in the business. The state is obliged to take this into account when regulating business processes. Often, an enterprise is capable of influencing a market industry or the market as a whole. Therefore, he is able to influence the economic situation in the country.

The importance of assessment activities

Assessing the value of a business is a necessary and useful procedure. This can be proven by certain examples of what this procedure gives:

  • with its help, business management can become much more efficient;
  • with its help you can easily make certain investment decisions;
  • through assessment, a productive business plan can be created;
  • through business assessment, you can smoothly move on to the reorganization of the company;
  • with its help you can identify how creditworthy a company is;
  • the assessment allows for tax optimization of the business.

Methods for assessing the value of a business involve several stages. To begin with, documentation is collected that gives necessary information about a company or enterprise. Next, an analysis and full study of the market on which the company’s activities are based is carried out. At the next stage, it is time to carry out settlement transactions. Next, you need to approve the results obtained as a result of the previous procedure. And at the last step, a report is drawn up, which serves as an assessment of the business.

Basic techniques

An enterprise or firm is assessed using three cost and comparative factors. You can describe each of them in general terms, and then consider them in more detail.

Involves estimating the costs incurred by the business. Very often assets do not correspond to the market price. In this case, the valuation of the enterprise is a careful and detailed revaluation. This method has one advantage - it is based on real assets.

Comparative analysis involves comparing the business being valued with a similar enterprise or company currently present on the market. Information is consumed from transactions relating to assets, stock markets and the takeover market.

There is also an income approach. In this case, the assessment of the value of a business is carried out after calculating the income expected from the operation of the enterprise. The main factor that determines the valuation of a business to a large extent is the profitability of the company. It turns out that the higher the profit, the higher the final assessment of the value of the business.

A little history

Estimating the value of an enterprise's business can be quite useful not only for the seller, but also for the buyer. There is quite interesting information regarding this fact. This applies to those points that were previously unknown to few people. That's why it's worth diving into history a little.

It is quite difficult to determine exactly when appraisal services appeared in this area, as well as who first offered them. However, modern approaches to assessing the value of a business were laid down in the twenties of the last century in America. It was at that time that a ban on alcoholic beverages was introduced in the United States, which everyone knows about, which caused a collapse in the alcohol market. At that time, it seemed that there was no point in valuing a business, but the economy would not have become a market economy if its participants had not looked for alternative ways.

The cost of the alcohol business had to be assessed quite soon after the “wine and vodka” collapse. Many factories that were involved in the production of alcoholic beverages received tax breaks from the state in 1920 for the damage that was caused to them. Of course, all companies were different sizes, therefore, the amount of benefits required was different; at the same time, everything had to be justified by law so as not to leave anyone offended. It was at this time that an assessment of the enterprise’s business value was required. It was then that terms arose that are still actively used, for example, “goodwill” or the value of business reputation, which implied the valuation of intangible assets.

Such business valuation principles take into account a whole set of factors that give an idea of ​​​​the future increase in the profitability of a particular company in comparison with the average performance of similar companies. Business assessment necessarily takes into account such important points as the company’s reputation, brand recognition, favorable location and others. Even now, most are confident that such research is based on such basic concepts as debt and assets.

But we have already become accustomed to the fact that valuation is often presented in a variety of forms, among which the most noticeable are measurements of the amount of money and income received through a given business, currently received and expected in the future. However, when it comes to cost, professionals try to take into account such things as the stability of the workforce, the name of the brand, as well as other equally important factors that can greatly influence the final results that the business value assessment gives.

How did they start counting?

All these conclusions and innovations became the basis for a memorandum to be issued in America in the twenties, which outlined fundamentally new ideas in business valuation. They also concerned intangible value. It turns out that modern principles business value estimates were laid down a century ago, and they turned out to be so reasonable that they spread throughout the world, acquiring many fans, amendments, improvements, innovations and developments. It turns out that expert assessment of a business is currently an important point for enterprises that care about the profitability of their activities.

So, we can give an example of business valuation to better understand what is meant by this process. Let's say you become the owner of shares in some large company A. Of course, you are interested in the value of your stake. To do this, you will read newspapers, study information on the Internet to get an idea of ​​​​the price of shares, which would be appropriate to request if you want to sell securities. In this case, there is no assessment of the enterprise's business.

In addition, if we are talking about a private company, then completely different laws apply, unknown to an unscrupulous or inexperienced appraiser. Because of this, confusion quite often arises in the business valuation process itself, as well as errors characteristic of this process. Here are a few of the most common myths in this area.

Myth one

An assessment of the value of an enterprise's business should only be done when it is ready for sale, or the creditor is required to carry out this procedure before imposing a debt. Of course, this reason is the most common and important. If up to this point the value of a business has never been assessed, then you can be completely sure that its owner was not interested in issues related to minimizing property costs, planning land ownership, and others. If a business is to continue to generate income in the future, then the owner must be interested in its valuation.

Myth two

The owner of the enterprise knows that the cost of business in this industry is equal to twice the annual income of the company. Therefore, he is convinced that there is no need to hire an outsider to assess the value of the business. Of course, such indicators exist, and they are especially common among brokers, economic observers and other specialists who are accustomed to compiling average lists, sticking to intermediate indicators even on such subtle issues.

But you should also decide what the “average indicator” hides underneath? This term implies that some enterprises are below this level, and some are above. It turns out that generalized statistical data are indicators for identifying certain results, but they are not able to tell about any specific transaction.

Every separate business is individual, so the assessment should be developed for this specific case, using a special project, and not according to some template. Otherwise, there is a high probability of disputes, omissions and inaccuracies.

Myth three

A competitor sold his business 6 months ago for a price equal to three times the company's annual revenue. Your business is no worse, so you are not ready to set a lower price for it. This myth also needs to be dispelled. Naturally, you need to be confident in yourself and your own business, but what happened six months ago cannot be relevant at the moment.

Assessing and managing business value requires answering several questions:

  1. What is the current profit?
  2. What is the expected profit growth in the future?
  3. What is the expected return on investment for potential buyers who purchase your business?

During the assessment, it is very important to be aware not only of the internal indicators of losses and income of the company, but also of the overall economic situation, both within the country and the whole world. It turns out that assessing and managing the value of a business involves taking into account not only local indicators and information from accounting, not only data about closest competitors, but also more comprehensive and global facts.

Myth four

It is believed that the value of a business is directly dependent on the purposes of its valuation. Naturally, there is endless talk about some kind of one-sidedness and bias in the assessments being carried out. What would be very profitable for the seller turns out to be unprofitable for the buyer, and vice versa.

The goals of assessing the value of a business are such as not to provide any benefit to a specific person, but to do everything objectively. Ideally, when conducting a qualitative assessment, you will receive the so-called market value of the enterprise. The price can be called fair only if the buyer and seller have information about all the conditions of the transaction, and know what and how is currently happening on the market. However, neither party should enter into an agreement under duress.

Only in this case will an assessment of the value of the company's business allow both parties to find out everything they need. All justifications must be relevant to the current situation, since this expert opinion will no longer be forwarded by anyone.

Myth fifth

If a business makes a loss, then there is no point in valuing it. In fact, private companies that are considered in the aggregate may not be very profitable compared to their peers. During the assessment, a study of all capital movements of the company is carried out, which makes it possible to find out not only the amount of profit, but also the return on investment capital. This term refers to the ratio of net operating profit to average total capital, which is invested in an enterprise or a certain type of activity, that is, the quotient of net operating profit divided by the volume of investment. This is a complex issue that not every businessman can handle. It is for this purpose that the assessment of the investment value of a business is usually carried out by third-party companies that have been specializing in this area for several years.

The seller, through an assessment of the enterprise’s business, will be able to convince the buyer of the legitimacy and legal literacy of the transaction, as well as justify the price he is asking for. Just remember that these events must be carried out repeatedly.

In this case, several of the most significant points can be highlighted. Through this assessment, the value of the company can be determined. Many entrepreneurs have no idea how much their business might actually be worth. Appraisal companies can help resolve this issue.

The basics of assessing the value of a business are such that they allow the company to find its market niche in which it will be well oriented. Every businessman needs to know how things are in the market, as well as how colleagues and competitors work, and what consumers demand. It is the provision of information about the current situation that is one of the responsibilities of firms that engage in business assessment.

Assessing and managing the value of a business is required to identify the current financial situation of the company, to make some kind of internal diagnosis, which must be listened to in order to use the correct methods of treatment or prevention.

A conscientious entrepreneur is interested in holding such events, as they help not only broaden one’s horizons, but also give an idea of ​​the current situation in commercial circles. A valuation professional will provide you with complete information about how the situation is changing in the country and in the world, in your industry, as well as what changes your company is undergoing, even if it is very conservative. First, they can show you an example of estimating the value of a business.

The information that is obtained in the process of these activities turns out to be indispensable for use in courts, as well as in regulating issues that involve taxation or financing. The assessment can become your reliable witness or an indispensable assistant-consultant. An income approach can be used for this.

Assessing the value of a business, if carried out regularly, will be useful in situations where an urgent decision is required on the purchase, sale or merger of companies. Sometimes it happens that all this information is required here and now, otherwise the deal may fall through, so there is simply no time left to call appraisers and carry out their work. If you have documents on hand containing information about the current assessment, then using them will be quite simple, you will only need to make certain amendments to them.

conclusions

Business is not a simple phenomenon that we encounter every day. Owning your own business is a business that requires not only financial but also temporary costs, ensuring the present and future for you and your family. Therefore, it is important to carry out any assessment activities regularly, using professional resources that set themselves the necessary tasks.

Business valuation conducted by real experts provides important and useful information, which is useful in various situations. This may be the need to conclude some kind of transaction, the sale of a company, disputes with tax authorities, or the search for investors who find it useful to know that your business can increase their capital, and here different approaches to assessing the value of a business are used.

The liabilities accepted for calculation include:

  • The article in the third section of the balance sheet is targeted financing and revenues;
  • Long-term liabilities for loans and credits and other long-term liabilities (fourth section of the balance sheet);
  • Articles of the fifth section of the balance sheet - short-term liabilities for loans and credits; accounts payable; debt to participants (founders) for payment of income; reserves for future expenses; other short-term liabilities.

2. Income approach

Valuation of an enterprise's business using the income approach is carried out on the basis company income, those economic benefits that the owner receives from owning an enterprise.

The valuation is based on the principle that a potential buyer will not pay more for a share in the company than it can generate future income.

The assessment of the enterprise's future income is made taking into account the factor of changes in the value of money over time - income received at the present time has greater value for the investor than the same income that will be received in the future.

The total value of an enterprise is calculated as the sum of income streams from business activities during the forecast period, reduced to the current price level, plus the value of the business in the post-forecast period.

Within the framework of the income approach, mainly two valuation methods are used:

  • direct capitalization method;
  • A method of discounting estimated income streams.

2.1. Direct capitalization method

The income approach views the business as a long-term asset, bringing a certain income to the owner of the enterprise. The direct capitalization method identifies a business with a financial asset of a certain kind - a perpetual annuity. The features of this asset are:

  • unlimited lifespan;
  • flow stability Money(equal annual amounts or annual amounts increasing at a constant rate).

2.2. Method of discounting estimated cash flows of income

This method of the income approach is used to evaluate enterprises that are in the stage of intensive business development, to evaluate companies for which there is no reason to assume an unlimited life. The lifespan of a business may be limited by lease agreements, a drop in demand for its products, etc.

Under the discounted cash flow method, the value of a business is based on future, projected income streams.

For ready-made businesses duration of the forecast period corresponds to the remaining effective life of the enterprise and reflects the ability to predict the timing of receipt of income from business activities with a reasonable degree of probability of their receipt, without additional, significant financial investments in the business being valued.

The remaining effective predicted life may be limited by the economic life of the product, the economic life of the product, moral and physical wear and tear of equipment and production technologies, the rental period of production and office space, and the prospects of the market in which the business being assessed operates.

A number of factors influence the magnitude of the risk of income increasing or decreasing. Taking into account the risks of investing in a business when determining the value of an enterprise using the income approach is carried out by selecting a capitalization rate or discount rate that is adequate to the risks and is used to determine the current value of the cash flows expected from the business.

The discount rate is the factor used to convert future payments or receipts into present value. That is, the discount rate is used to determine the amount an investor would pay today for an investment asset in order to receive future income.

3. Assessing the value of a business using a comparative approach

The comparative approach to business valuation assumes that its value is determined by how much it costs. may be sold in the presence of a sufficiently formed market. In other words, the most probable value of the business being valued may be the actual selling price of a similar enterprise recorded by the market.

The main advantage of the comparative approach is that the appraiser focuses on the actual purchase and sale prices of similar enterprises; the method actually reflects the supply and demand for a given object of assessment, since the price of the actual transaction takes into account the situation on the sales market of ready-made businesses as much as possible.

To determine the value of an enterprise using a comparative approach, reliable market information on purchase and sale transactions of ready-made businesses, and reliable financial information on sold businesses is required. On the market, this information is closed.

Valuation using the comparable sales method has its limitations. The comparative approach to valuation does not take into account the development prospects of the business being valued; according to this approach, it is advisable to evaluate enterprises that have reached a stable profit, and in relation to which it can be assumed that in the realistically forecasted future their activities will not be terminated

4. Estimation of business value using the rule of thumb method

Rules of thumb allow you to take an inside look at the problems of the value of an enterprise, company or share in it, as well as issues of security and reliability of the business. However, cost data obtained using rules of thumb should play decisive role when making decisions only if they are supported by other assessment methods.

Most of the rules of thumb are percentage of gross income(volume of sales, amount of bills paid for the year, annual gross income, annual amount of royalties received, annual revenue, all of which are equivalent in the sense of applying rules of thumb). The adjusted annual income when applying the rule of thumb corresponds to the total cash flow, including wages owner and the net profit of the business itself. In other words, it is the amount of revised, normalized income, often called seller discretionary income or company cash.

Estimates of an enterprise's business obtained by the above methods may vary. The final element of the assessment process is comparison of ratings, obtained on the basis of these methods, and reducing the resulting cost estimates to a single cost of the object. The reconciliation process takes into account weak and strengths each method determines how adequately they reflect the objective state of the market. The final market value of the enterprise is calculated as a weighted average.

The process of convergence of estimates leads to the establishment of the final value of the object, which achieves the purpose of the assessment.

On our website you can familiarize yourself with examples of our work on enterprise valuation, and also with procedure for ordering and performing this work. Read about the possibilities cost optimization for this service in our article "Cost of business valuation" .
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From this article you will learn:

  • What is company value and why is it needed?
  • What types of company value are there?
  • How to calculate the value of a company
  • How to quickly calculate the value of a company
  • What are the features of company value management?
  • How to increase company value

A business exists not only to receive funds for the goods or services for which it was created. Business is also an investment. Many entrepreneurs make money by organizing and launching new companies with the aim of further selling them. Although this is far from the only reason for selling a business. When a company goes bankrupt or cannot solve its problems on its own, there is often a need to assess the value of the company before selling it. In this article we will talk about how to understand everything related to the value of your business and avoid difficulties.

Why is it necessary to know the value of a company?

Now the overwhelming majority of companies in Russia do not consider assessing the value of a company to be something necessary, and their owners often do not see the point in this until the business reaches high levels and in the public arena. Until then, the assessment is perceived as a reason for the owner’s personal pride.
There are actually about twenty economic goals for calculating the value of a company, but there are only three most important ones:

  1. This provides objective data on the state of the business and the effectiveness of the management apparatus in it. By reacting to them, owners can always correct course in time.
  2. It is impossible to approach investors for additional cash injections without information about the real value of the company, otherwise you risk not getting what you came for.
  3. Valuation allows you to take into account assets that arose during the economic activity of the company in an extremely correct and competent manner.

Of course, assessing the value is necessary not only for buying or selling a ready-made business. This indicator is important for strategic management company. A clear understanding of the value of your company will also be required when issuing securities, shares and entering the stock market. It is also significant that no investor will agree to invest their money where the company’s value has not been assessed.
Enterprise business valuation (business valuation)- nothing more than determining the value of the company as non-current and current assets that can bring profit to the owners.

When conducting an assessment examination It is necessary to estimate the value of the company's assets:

  • real estate
  • equipment and machines,
  • stocks in warehouses,
  • all intangible assets,
  • financial investments.

Business is an investment product. Any investment in a company is made only with a long-term view of returning funds with a profit. Since quite a lot of time passes between investments and income in business, to determine the real value of a company, a specialist analyzes its activities over a long period and separately evaluates:

  • past, existing and future income,
  • efficiency of the entire operation of the enterprise,
  • business prospects,
  • competition in the market.

Once this data is obtained, the company being evaluated is compared with other similar firms. Only a comprehensive analysis helps to calculate the real value of a company.

Valuation of an enterprise or company is the process of determining the maximum probable price of a business as a product when it is sold to other owners. Moreover, any enterprise can be sold either entirely or in parts. The company, as the property of its owner, can be insured, bequeathed or used as collateral.

What are the different types of company value?

The activities of the appraiser are regulated by the federal standard “Purpose of valuation and types of value”(FSO No. 2), which defines several main types of value of any valuation object:

  1. Market price.

The market value of the property being valued, for example a business, is the most likely price at which it can be sold on the day of valuation. following conditions: alienation takes place on an open market with existing competition, the parties to the transaction act reasonably and have complete information about the subject of sale, and its value is not affected by any force majeure circumstances.
The market value of the company is required in the following cases:

  • when the company’s property or the enterprise itself is seized for government needs;
  • when the price of outstanding shares is determined, which the company buys by decision of the meeting of shareholders or the supervisory board;
  • when you need to determine the value of a company acting as collateral, for example in a mortgage;
  • when the size of the non-monetary part is determined authorized capital firms;
  • when the owner goes through bankruptcy proceedings;
  • when it is necessary to determine the amount of property received free of charge.

The market value of a company is used in all situations where tax issues, both federal and local, are resolved.
It is precisely this type of value that is always determined in purchase and sale transactions of a business or any part of it, since market value is the most objective indicator and does not depend on the wishes of the participants in the process, it corresponds to the real economic situation.

  1. Investment cost– the value of a company that is related to the profitability of the enterprise for a particular investor under existing conditions.

This type of cost depends on personal investment requirements. Every investor invests his money in a business with the goal of making a profit in excess of the amount of invested capital, and not just the return of this “debt”. So the investment value of a company is calculated based on the expected income of the investor and the capitalization rate of these investments. This type The value of a company must be calculated when buying and selling a business, merging, or acquiring companies.

  1. Liquidation value.

This cost option is calculated in a situation where the company’s work is expected to end for some reason (for example, reorganization, bankruptcy or division of the company’s property). When determining the liquidation value of a company, they find the most likely price at which the company can be sold for the shortest possible time exposure, provided that the owner of the object of sale is forced to enter into a transaction to alienate his property.

  1. Cadastral value.

This is the market value approved and established by legislation in the field of cadastral valuation of real estate. It is this indicator that mass valuation methods should arrive at in the case of the cadastral value of an object. This type of value is calculated most often for property tax purposes.

What documents are needed to carry out an assessment of the company's value?

  1. Duplicates or copies of the constituent documents of the enterprise.
  2. Documents on the inventory of company property.
  3. Written confirmation of the company structure and types of its economic activities.
  4. For joint stock companies, duplicate reports on the issue of securities and copies of prospectuses will be required.
  5. Documentation on fixed assets.
  6. If there is real estate for rent, then you need to provide copies of the contracts.
  7. To assess the value of a company, financial statements for 3-5 years are required - about all profits and losses of the business.
  8. The final conclusion of the audit, if it was carried out at the enterprise.
  9. A detailed list of all assets: tangible and intangible, in shares, bills, etc.
  10. Decoding of receivables and payables.
  11. If the company has subsidiaries, then it is necessary to collect information about them and provide financial documentation for them.
  12. A ready-made business development plan for the next 3-5 years, containing potential gross revenue, investments, expenses and calculation of net profit in each next year.

This is a preliminary list of documents that the appraiser will need to conduct an examination of the company’s value, however, it can be shortened or supplemented at the request of the specialist.

How to find out the value of a company

Obviously, one of the most objective indicators of the performance of an existing business is its cost. It makes it possible to calculate the price at which a company can be sold on the open market in a competitive environment, or to predict the future value of the company's benefits. The question of how to assess the value of a company is a serious practical task of high importance for any entrepreneur.
To obtain an adequate assessment, first of all it is worth define the main goal cost calculation procedures. The most likely options are:

  1. Determining the value of the company was required to complete certain legal actions. In this case, they turn to a licensed independent appraiser, who draws up his conclusion in the “Evaluation Report”, regulated by Federal Law No. 135.
  2. You need to find out how much your business is really worth on the market; in this situation, the official “Valuation Report” will no longer be needed.

The fundamental difference when carrying out these procedures is not the quality of the appraiser’s work, but the cost of services and the form of the conclusion. In the first case, the specialist must comply with the requirements current legislation regulating its licensed activities, and usually these requirements significantly increase the price for the work.
In the second case, you will need to independently develop and clearly formulate a task for the appraiser, listing all the procedures you are interested in, factors of the company’s value and parts of the business that are subject to examination. So, as a result, you will receive only the information you need.
Business valuation means calculating its value as a property complex, which leads to profit for the owner.
To calculate the value of a company, you need to take into account all its assets, intangible and tangible: real estate, technical equipment, cars, inventory, financial investments. Next, past and potential income, enterprise development plans, competition and the economic environment must be calculated. At the end of the comprehensive examination, the data is compared with information about similar companies, and only after this the real value of the company is formed.
For the above calculations, it is applied three methods:

  • profitable,
  • expensive,
  • comparative.

However, in fact, there are so many situations that they are segmented into classes, each of which requires its own approach and corresponding method.
To use the most appropriate calculation method, you need to first analyze the situation, the circumstances at the time of assessment and other conditions.
For some types of business, the valuation of the company is usually carried out based on commercial potential.
For example, in the case of the hotel business, we are dealing with guests as a source of income for the company. In a method called profitable, it is this source that will be compared with operating expenses to assess the profitability of the enterprise. This method is based on discounting the profit from renting out the company's property. Finally, after the assessment, both the cost of buildings and land are included.
The company's value is assessed using cost method, when we are talking about a business that is not subject to purchase and sale, as is the case with government agencies or clinics. This assessment takes into account the cost of constructing the building, depreciation and wear and tear of the property.
Comparative method used when there is a market for such a business. This is a market-based method of assessing value, which is based on an analysis of similar properties that have already been sold in other markets.
Hypothetically, all of the above approaches must give the same value. But in fact, market conditions are not ideal, businesses are often inefficient, and information is insufficient and imperfect.
Determining the value of a company in each of these approaches allows usage various methods estimates:

  1. For the income approach it is:
  • capitalization method, which is used in the case of established companies that managed to accumulate assets in previous periods;
  • method of discounting cash flow for a young business that will develop in the future. Used when the company has a potentially promising product.
  1. For the cost approach, the following are used:
  • the net asset method - when it comes to reducing production volumes or closing a business on the initiative of the investor;
  • and the company's liquidation value method.
  1. For the comparative approach these are the methods:
  • transactions, which is used in situations similar to the conditions for applying the net asset method;
  • industry coefficients that evaluate operating enterprises that do not plan to close in the period after the examination;
  • capital market. This method is also intended for “living” companies.

Please note that the last three methods are only valid if there is a similar business that matches the type of the valuation object, otherwise the analysis will not be indicative. Next, we’ll briefly talk about the use of these methods by which the value of a company is calculated.

If you require an estimate of cost for the forecast period, it will be determined discounted cash flow method. To bring potential income to current value, a discount rate is used.
In this scenario, the company’s value is calculated according to the following formula:

  • P = CFt/(1 + I)^t,

Where P- price,
I- discount rate,
CFt- cash flow,
t– this is the number of the time period during which the assessment occurs.
Do not forget to take into account that in the period after the forecast, your company will continue to operate, which means that future prospects will determine a wide variety of options - from explosive growth of the enterprise to bankruptcy.
It happens that calculations are carried out using Gordon model, implying stable and systematic growth in the company’s sales and profits, as well as equal volumes of capital investments and depreciation amounts.
For this situation, the following applies: formula:

  • P = СF (t + 1)/(I− g),

wherein CF(t+1) is the cash flow in the first year following the forecast period,
I- discount rate,
g– flow growth rate.
The Gordon model is most convenient to use when calculating the value of a company if the object of assessment is a large business with a large market capacity, stable supplies, production and sales, located in favorable economic conditions.
If bankruptcy of the enterprise and further sale of property is predicted, then to calculate the cost this formula is required:

  • P = (1 −L av) × (A −O) −P liquid,

Where P– company value,
P liquid– costs of its liquidation (such as insurance, services of a valuation expert, taxes, employee benefits and management costs),
ABOUT– amount of liabilities,
L avg– discount provided due to the urgency of liquidation,
A– the total value of all the company’s assets after their revaluation.
The results of calculations using the current formula are also influenced by the location of the enterprise, the quality of assets, and the situation on the market as a whole.

Quickly calculate the value of a company using an express assessment

Express valuation model, which we will talk about in more detail, is based on the method of discounting cash flow for an enterprise that we already know. For convenience, we abbreviate this term as DDP method For the company. These concepts, as we remember, are used in the income approach to valuing a company.
This approach is divided into the following most common ones: assessment methods:

  • method of calculating economic profit;
  • DDP method;
  • real options method.

According to a lot of information, both direct and indirect, the most adequate method for determining the value of a company is the DCF method. Provided that we choose to display the behavior of the stock market (for example, the capitalization of an enterprise according to its data) as a criterion for the effectiveness and expediency of the method.
Important, that The DDP method has several varieties, corresponding to different purposes and differing in techniques for calculating both the flow itself and the discount rate. We list the most popular varieties:

  • DCF for the equity capital of a joint stock company (Free Cash Flow to Equity);
  • discounting of DP for the company (Free Cash Flow to Firm);
  • and another type of cash flow discounting - for capital (Capital Cash Flow);
  • Adjusted Present Value.

At the same time, the entire DCF method for an enterprise is based on this formula:

In which the indexes i And j the serial numbers of periods (years) are indicated,
EV(Enterprise Value) – the value of the company,
D(Debt) – the cost of short-term and long-term debt,
FCFF stands for "free cash flow for the firm", excluding debt financing, remaining after taxes (or operating cash flow),
E(Equity) is the amount of the organization’s own capital,
WACC(Weighted Average Cost of Capital) is translated as “weighted average cost of capital”, which is calculated as follows:

r d– the cost of the company’s capital, which is borrowed,
t– income tax rate,
r e– the amount of equity capital.
When calculating the value of companies in Russia, it is often the following simplifications are introduced:

  1. Weighted average cost of capital WACC can be denoted as a discount rate – r. This move does not destroy the adequacy of the formulas, since for business in Russia the calculation WACC is not always possible. Because of this, analysts resort to other calculation options.
  2. And let's assume that the variable r is constant throughout all years. This is due to the fact that the definition this indicator in Russia, even for one specific year, causes big problems and leads to methodological stupor. So, if we do not introduce such a simplification, then we will unreasonably complicate the entire model for express assessment of the company’s value.

As a result of all the above transformations we get the expression kind

Factors of company value within the described valuation model are any scalar quantities and vectors that affect the value of the enterprise in calculations.
Note that forecasting free cash flow for a firm for every year of an indefinite period is quite difficult and makes little sense. This happens because the meaning of the terms with the index i too small because of the denominator, and the imperfect calculation of the numerator has almost no effect on the final result of this calculation. For this reason, the following popular practice is used an approach:

  • the company's value is divided into the forecast period and the post-forecast period;
  • in the first period, cost factors are predicted based on assumptions and plans for the further development of the enterprise;
  • in the post-forecast period of time, cash flows are estimated based on the hypothesis of a fixed rate of their growth throughout the entire period.

Valuation of a company: common mistakes

Anyone who has encountered valuation services knows perfectly well that exactly how they calculate it significantly affects the market value of the same business being valued. The resulting amounts may vary several times. Such results often lead to serious financial damage, conflicts and even litigation.
Let's call There are several main reasons for variations in the value of the property being assessed:

  1. Methodological errors.

Inadequate value is obtained as a result of calculation errors, as well as methodological inconsistencies in assessing the value of the company. Carefully study the experience and professional level of the appraiser.

  1. Intentional misrepresentation of value.

Unfortunately, to this day, a certain share of the market for assessment services for various objects is occupied by “custom” examinations. That is, the real cost can be underestimated or overestimated in the expert’s opinion at the request of the customer.

  1. Subjective opinion of an expert.

Although the assessment procedure is based on specific values ​​and economically sound assumptions, the process remains largely subjective. So the outcome may depend on the appraiser’s personal view of the future of the market, financial capabilities and other factors of the company’s value. The decision on how to treat economic conditions must be made by the expert conducting the analysis. And he will not always be able to predict even the most seemingly predictable things. Judge for yourself: who could have predicted the development of the oil market at 66 dollars per barrel two or three years ago, and not at 25 or even the optimistic 30 dollars per unit?

  1. Wrong statement of the problem.

The size of the final cost, which will be obtained as a result of complex analysis and calculations, largely depends on the correct formulation of the problem, on the accuracy and adequacy of the choice of the type of cost, and on the final goals for which the entire procedure is carried out. It is not surprising that the same security can be valued at amounts that differ by 20 or even 50%. This is influenced, for example, by whether it is a minority or majority-owned company. Depending on the purpose of determining the value of the company, the calculation process is carried out differently.

  1. Distortion of official reports.

The management of some enterprises deliberately makes a discrepancy between real and official reporting. And distortion of this factor of the company’s value inevitably leads to incorrect assessment results. This problem is even more aggravated in the case when it is necessary to make payments for a business whose share is pledged when receiving loan funds. Banks prefer to work not with management reporting, but only with official ones, which significantly changes the assessment indicators.

  1. Legislative shortcomings.

Nowadays, experts in the field of valuation turn to three main methods of this procedure - cost, profit and comparative. Official valuation standards state that the final calculation must take into account the results obtained in all three approaches. But these methods do not always correspond to the objectives of the examination.
List of factors to pay attention to, in order to clarify their meaning and receive comments from an expert assessing the value of the company:

  1. Cash flow forecast based on the results of the analysis and the discount rate reflecting the costs of attracting third-party capital - with the income approach.
  2. The cost of all intangible assets (including those that are not included in this category according to the legislation of the Russian Federation) – with a cost approach.
  3. Adequacy of multipliers (price coefficients) and comparability of the analogue company with which the comparison is being made - with a comparative approach.

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