Comment: on how to Value a Company

Initial quip:

Ask three accountants, get three answers. Take the average of the reasonings ( not the average of the valuations ). Lol

What I am saying, friend, is that you need to look at the ways the valuation is determined. The fundamental approach, depends on who is reading the valuation...

If you have a day to study, probably https://www.investopedia.com/terms/v/valuation.asp is a good starting point.

But otherwise here are a few simple concepts:

• - a buyer who wants the tangible fixed and capital assets of the company will only value the company at Net Tangible Asset value (cash + firesale price of al other items)
• - a buyer who wants to own the business passively may value it as a series of cashflows (dividends) so a prediction model is needed (pandora's box)
• - a buyer who wants to actively grow the whole business is a higher variance version of the last guy... so the prediction models will be crazier (pandora's box, squared)
• - a buyer who wants to extract strategic value from one small part of it will have a secret special high value placed on one piece, but value the remainder like the first guy

Now the 'professional valuer of companies' is going to consider all the possible buyers on the market, and try to guess the likely actually obtainable sale price in that market, with equal consideration for all the equivalent operations for sale in that market.

But in order to do that, the valuer needs to have market data. Now the amount of market familiarity varies hugely between one valuer and another. You can ask a general unclely accounting firm, a lifetime restauranteur, and a technology VC to value a company, and given their different knowledge, they are going to come back with different models and prices.

If you're looking to sell a / part of a company... as the salesperson, YOU should lead the pitch in determining what the valuation method is.

I have funny stories about my own share sale experiences, but I'll leave that out for now lol. Still grinding...