Local business valuators are usually Certified Public Accountants who assist business owners, buyers, sellers, banks, investors, and other interested parties understand the economic value of a business. Local business valuators have to be able to crunch numbers, but more importantly, local business valuators need to be able to understand and evaluate what the numbers mean. The complex process in which local business valuators engage must measure not only the typical accounting benchmarks, but the larger financial picture of an enterprise. This will include assessment of the activities of competitors, the influence of market forces, history and projected cash flow, a look at earnings streams, and possible future scenarios. Typically, local business valuators will use one of three methods for identifying the economic value of a business. The three basic analysis are: asset valuation; income valuation; and market-based valuation. A local business valuator using the asset approach will determine the value of the assets on either a going concern or a liquidation basis that is, the assets minus liabilities from the balance sheet or an assessment of what the assets would bring upon sale. Using the income approach, a local business valuator will look at earnings and base an assessment of value on expected cash flows, informed by past cash flows and/or on projections and expected earnings in the future. The market-based valuation will require the local business valuator to take a look at comparable what other businesses similar to the target business might fetch in the marketplace upon sale. Often, experts will advise that all three approaches be used in any given situation, so that the people concerned can compare and analyze value from several different perspectives. Qualified local business valuators will be comfortable and adept at all three methods.
