A proper valuation takes into account the specific circumstances of the company and the current and future developments that can affect the value of the enterprise.
In a positive as well as in a negative sense.
A decent valuation is based on the following elements:
- Money (cash flows): how much do I invest now and what will I get in return later
- Time: when do I receive the proceeds of my investment
- Risk: what return is required, considering the risks of the investment
Business valuation is more than just a calculation
Michael Porter’s five forces model
hen business valuation is limited to calculation only, thinking often comes to an end...
Historic results can be an indication for valuation, but…
Past results are not guaranteed in the future!
If a valuation is based on averages in the sector or on similar companies, the question is:
- Is the company to be valued truly comparable?
- Is the valuated company really average?