Finance
Valuation: A Modern Art
B usiness valuation is still a mystery. "You can't really challenge the worth of a business," or "Every business
is so unique that no one could ever put a justified value on it," Both of these statements show the fact that
professional valuators have put decades to perform accurate business valuations but still they find its not a
dart game.
All of the processes that make up company have a cost. Culture, key management, labor, overhead,
inventory, capital, goodwill, employees, patent, copyright, and even human relationships. All of these have a
value associated with them. Some assets are so unique that it's very difficult to value them practically. In fact,
if any of the elements are missing probably its possible that we will not be able to justify the value of the
business. So judging and considering every parameter in the valuation is important.
In these turbulent times or in exponential growth period, the normal methods of valuation of businesses
don't fit. Net Asset Value, Sum of Parts, Discounted cash flows, multiples of future revenues - nothing seems
acceptable. So many businesses are available at below its book value of assets and has dividend yield as
high as 8%. So it is like equilibrium in economics, which is just in theory, but rarely that is achieved. So
almost all time we, don't arrive at right valuation using any mathematics model. So, that makes us not
believing in projections of target as things are so uncertain. Now the big question is if it is not science than
how to go about it.
There is a myth that determining the value of a profitable company is simply a matter of mathematics.
Really this myth only is helping various transactions getting executed, because both buyer and seller arrives
at the different value of the same business.
www.Venture-Care.com/Magazine
December 2017
11