Appraisal Valuation Methods Overview

15 Feb 2017 10:20 AMTroy Potter
Appraisal Valuation Methods Overview




Generally, two or more of the following methods are used to appraise the value of a business:

1) Industry Ratios

2) Asset Based

3) Earnings Based

4) Market Based

5) Capitalisation


The appraised value is then subjected to the “sanity test”. Some businesses are in

a growth industry where their track record is well established and their projections

solid. Other businesses may be in what is known as a sunset industry where projections

are less optimistic.


Many factors affect the true market value of a business, including business sector, economic

conditions, business cycles, interest rates, labour availability and a whole host of other

influences. Similarly, the value of trademarks, brands, intellectual property and goodwill is not always

easy to quantify. Balancing all these factors with the book valuation of businesses

establishes the true market value.


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