Current Market Value

Current Market Value refers to our professional assessment of the fair market value of a business. Fair market value is:

“The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.“

We’re valuing what the business might sell for based on a hypothetical buyer, who has all the necessary information to make an informed decision on the purchase of the asset. This differs from a real-world buyer, where the value (price) of the business may be influenced by specific qualities of the business or competition in the marketplace.

How do we conclude to Current Market Value?

At Value Scout, we abide by time-tested valuation methodologies to conclude our estimate of Current Market Value.

This means we use either a combination of, or the sole use of, the Market Approach, Income Approach, or Asset Approach to conclude to Current Market Value.

The Market Approach uses comparable transactions or public data to derive a multiple to be applied to the company being analyzed. The main assumption with the Market Approach is that a similar company, as defined by industry and business description, will sell for roughly the same ratio of the transaction price to earnings.

The Income Approach applies present and future value in order to derive the value of a business. In doing so, the future free cash flow generated from the business is discounted to its present value through the use of a discount rate to account for the risk in ownership of the asset.

Lastly, the Asset Approach concludes to value based on the equity listed on the balance sheet. Typically, this approach is not used, as it does not consider a business's ability to generate earnings from its assets. Instead, we use this approach as the floor to value.

What influences our decision?

A thorough analysis of a business’s performance, growth prospects, and risk allows Value Scout to pinpoint our estimate of what the Current Market Value of a business is. These are the three “pillars of valuation,” that allows us to not only give our estimate of what a business is worth today but identify areas of improvement to help you close the Value Gap to reach your exit goals.

Note: Value Scout Evaluations are to be used for Exit Planning Purposes only. If your company needs a valuation done for any other purpose, contact our sister company Quantive Business Valuations for more information.

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