Consulting Conversations: The Value of a Company

Author:Hank Harris
Publish Date: Sep 01, 2021 04:31 PM EDT

Sun shining in a forest

How does one value a company?

Director of Consulting, Hank Harris answers the question in this episode of Consulting Conversations. Watch it now!

So, there are three generic approaches to evaluation, which is a very complicated topic. But typically, there's what's called the market approach, the second one is called the income approach, and the third one is called a cost approach, and to try to boil those down.

The market approach means looking at comparables. You might use the analogy of residential real estate. You know where the idea would be looking at comparable businesses to get a feeling for how they're valued.

The income approach is to look at the earnings capacity of the company and what that translates to practically is either multiple earnings or a discounted cash flow analysis of the company's earnings, depending on the nature of the company.

And then the cost approach is fundamentally, you know, looking at the asset value of the company trying to boil all that down from a practical standpoint most businesses are either worth their net assets or a multiple of their earnings depending on which one of those is greater.

I would love to hear from any private business hunt owner in North Carolina that thinks we could be of some help to them and understanding how their business gets better or where it might go in the future.

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