TAXAJ

Valuation of Business/ Shares/ Goodwill/ Net-Worth

These questions often arise during any transactionโ€”whether it is an acquisition, disposal or mergerโ€”what is the fair value? What should the maximum price be paid? At the same time, stakeholders and regulators are demanding greater transparency through fair value reporting and emphasising fair valuations. Taxaj provides an integrated approach by bringing together professionals with extensive valuation, technical accounting, corporate finance, tax, strategy, and deep industry experience, so we offer to help you measure, analyse and report on a broad range of valuation issues.
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About This Plan

Get a fair value valuation done for your business with top professionals.

Created by potrace 1.15, written by Peter Selinger 2001-2017

Timeline

It usually takes 3 to 5 working days.

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Services Covered
Who Should Buy
How It's Done
Documents Required
Services Covered

  • Valuation of Business
  • Valuation of Shares
  • Valuation of Net Worth
  • Valuation of Goodwill
Who Should Buy
  • Any business entity or individual
How It's Done

    • Purchase of Plan
    • Expert Assigned
    • Share requirements with Expert
    • Upload documents on vault
    • First draft prepared
    • Review the draft in two cycles
    • Download your final copy
Documents Required
  • The documents required to be shared will depend upon the agreement/contract/notice to be drafted and shall be communicated on having an understanding of your case by our experts.

   Approaches towards Valuation of Business

   Why Valuation matters?

Calculating the worth of a business is essential in every turn of events in your business or personal life e.g. if you're buying any business you must know the worth you must spend or while selling your business you must be sure to realize the actual worth of it, but that's not the only reason it is done.


๐Ÿ‘‰ While looking for venture funding, they will want to know what the company's worth is.
๐Ÿ‘‰ If you're in a partnership and one partner wants out, you need to calculate the value of that partner's share of the company.
๐Ÿ‘‰ In a divorce, a valuation of the business may be required so you can divide up marital assets equitably.

The company valuation can be contentious sometimes. For example, in the partnership scenario, your partner may want a higher value for his stake than you think his share is worth. That's why objective valuation methods are helpful.

   Valuation of Business by Stock Price

In a public limited company, it's relatively simple to develop a market value by assuming the stock price. For example, the company has 5 lakh shares, and they're currently listed at Rs. 30/- each. So here, the worth of the total shares is 1.5 Crores. Stock Value is the simplest way to set a price, but it's not the best. Certain other things need to be taken care of while doing a proper valuation, as the share price is based on the company's perceived value, which may not reflect the actual worth. The main delusional reason for stock prices is that they fluctuate. Using stock price solely for valuation is too much risky because:


๐Ÿ‘‰ Investors may take the share price on the anticipated success of an IPO or a newly launched product. When the product debuts, it could flatline for the time being, and the shares might plummet.
๐Ÿ‘‰ The investors buying up the stock may have gone with the trend or word of mouth and have not accurately evaluated the business.
๐Ÿ‘‰ Investors may anticipate future fantasy growth as per the IPO that doesn't happen.
๐Ÿ‘‰ Investors may assume that as the company grew last year, it will be a repeating event and raise as much in the coming year. That doesn't always happen.
๐Ÿ‘‰ The stock price may respond to temporary lousy news that doesn't reflect the company's underlying value and can react to it.
๐Ÿ‘‰ If the shares aren't heavily traded, the share price may not mean much, and just the figures may just be for calculation purposes.


Of course, if you have a private limited company, you need to use a different method to establish the company's value. In this case, a Chartered Accountant or a Valuation Expert might help you.

Valuation of a Company by Comps

Another method for setting a price is to compare one company to a similar one. If you're selling your business, for example, you can look for companies in your geographic area in the same industry and extrapolate your value from theirs.


One way to acquire these "comps" is to look for businesses that have sold recently and find out their sale price. Another is to pick a metric such as the price/earnings ratio, if the information is available.

Using comps has its limits, though:

  • You may not be able to find comparable sales.
  • If the sale data isn't recent, it may not reflect the current market value.
  • Few comps are identical. Figuring out how to adjust the formula to reflect key differences, such as one company having aging equipment or better-trained staff, may be tricky. 
   Valuation of Business by Stock Price

In a public limited company, it's relatively simple to develop a market value by assuming the stock price. For example, the company has 5 lakh shares, and they're currently listed at Rs. 30/- each. So here, the worth of the total shares is 1.5 Crores. Stock Value is the simplest way to set a price, but it's not the best. Certain other things need to be taken care of while doing a proper valuation, as the share price is based on the company's perceived value, which may not reflect the actual worth. The main delusional reason for stock prices is that they fluctuate. Using stock price solely for valuation is too much risky because:


๐Ÿ‘‰ Investors may take the share price on the anticipated success of an IPO or a newly launched product. When the product debuts, it could flatline for the time being, and the shares might plummet.
๐Ÿ‘‰ The investors buying up the stock may have gone with the trend or word of mouth and have not accurately evaluated the business.
๐Ÿ‘‰ Investors may anticipate future fantasy growth as per the IPO that doesn't happen.
๐Ÿ‘‰ Investors may assume that as the company grew last year, it will be a repeating event and raise as much in the coming year. That doesn't always happen.
๐Ÿ‘‰ The stock price may respond to temporary lousy news that doesn't reflect the company's underlying value and can react to it.
๐Ÿ‘‰ If the shares aren't heavily traded, the share price may not mean much, and just the figures may just be for calculation purposes.


Of course, if you have a private limited company, you need to use a different method to establish the company's value. In this case, a Chartered Accountant or a Valuation Expert might help you.

Methods Of Valuation Of A Company

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