What is Business Valuation Service?

Here's everything you need to know about our Business Valuation Service

1/24/20233 min read

Business Valuation service refers to the process of establishing the value of a business or an entity based on the economic value of the business and its offerings. It is a crucial step in mergers and acquisition as it requires placing a value on the target entity in order to determine its financial worth. Business valuation is also useful for stockholders who wish to determine the net worth of the business and devise suitable strategies for the growth and expansion of the company. With Kuwait witnessing an increase in M&A activities in the last few years, small business valuation service has become an imperative part of the process.

Alkhuzam & Co. is one of the top valuation firms in Kuwait and it employs three different methods to determine the value of a business. These are commonly accepted methodologies that are applied at an international level and can be scaled down for small to medium sized enterprises as well. Let us introduce some of valuation services examples.

Income Approach

Some people asked, what business valuation services cost? Typically, income-based valuation approaches reduce a future benefit stream to its present value using the appropriate discount rate, converting it into a single sum. In other words, figuring out the present value of a future benefit stream is the foundation of any revenue approach. There are two commonly used methodologies under the income approach as described below:

  1. Discounted Cash Flow

    The Discounted Cash Flow Method is commonly used for companies that anticipate different levels of revenue and earnings growth in the future. It utilizes a discount rate that reflects the cost of capital of the company and discounts the expected cash flows of the company using the discount rate. The resulting net present value of the cash flows represent the income generation that will result from the business and this is used to extrapolate the value of the business. Alkhuzam & Co is one of the top business valuation firms in Kuwait.

  1. Capitalization of Cash Flow

    If you are searching about company valuation experts or business valuation professional , you can find it here. Using a single projected cash flow stream capitalized at a risk-adjusted rate of return, this approach values a company. When a subject firm has recent or historical results that are thought to be indicative of outcomes in the future and is only anticipated to expand at a sustainable and economical rate, it is most appropriate to use the capitalization of cash flow method. This strategy is typically employed for businesses that are mature in character and have a stream of earnings and revenues that is quite steady.

Market Approach

This methodology employs the use of market values to assign a value to the given entity. The first method used is the Comparable Market Transaction Method where a firm is valued using price multiples from the sales of businesses that are comparable to the subject company. Finding transactions involving the acquisition of comparable companies, choosing the transactions that most closely reflect the company's operations and that took place under circumstances that are similar to those of the industry and the economy, and then applying the indicated pricing multiples from the representative transactions are the steps taken in this method. We also can provide national business valuation services.

Asset Approach

The final method is determining the value using the book values of the assets and liabilities of the entity. The equity value of an entity is determined by subtracting the fair market value of its assets from its liabilities. This method involves converting assets from book value to fair market value, and then deducting recorded and unrecorded liabilities from the total of the adjusted assets. Application of the Adjusted Net Book Value Method often defines a company's "floor value" that is the amount that would be received if its assets were sold and its obligations were paid off. When losses are consistently generated, when a company is capital-intensive or when valuation procedures based on net income or cash flow levels show a value lower than net asset value, this methodology is appropriate.

What is Business valuation service definition or meaning ?
It’s a way to assess the status or the performance of a business or to specify the value of a business in specific time.

What method is most suitable for your company?

The method most suitable for your business depends on the preference/decision of the management and the amount of information available in the market. Some businesses employ a simple asset based valuation while competitive business with market intelligence use advanced metrics and index to develop comparative value of the business. Our business advisors are fully equipped with market intelligence and financial tools to help you determine an appropriate value for your target entity.

We're here to help

Visit us to know more about the application of valuation services and discuss the different ways in which we can serve your business.

info@alkhuzam.com | +(965)22260014 | +(965)66162610

Located at: KIPCO Tower, Sharq, Kuwait

Blog Author: Shifa Nizam