Approaches and methods for assessing the value of an organization. Basic approaches and methods for assessing the value of a company. Net asset method

On modern stage development of the business market and the global economy, the assessment of intangible assets and intellectual property has become no less important than tangible ones. The role of objective analysis and accurate determination of business value has increased. This procedure is simply necessary for those who are planning investments, purchase or sale of enterprises. An independent assessment of the company's value in such situations becomes an important management tool that will make it possible to make right choice, avoid many risks and get maximum profit. It will not even be able to fully function and expand without a qualitative assessment at one of the stages of development.

What is business valuation?

Business valuation is a procedure for determining the market value of an enterprise (taking into account tangible, intangible assets, financial condition, expected profit), which is carried out by authorities or experts. The object of assessment can be any property together with a package of rights to it. The meaning of the term “business valuation” is slightly different. It involves determining in monetary terms the value of an enterprise, which includes (in addition to assets) its utility and the costs incurred to obtain it.

The main purpose of the assessment is to establish for the client the market value of the assets being assessed. The customer initiates a business assessment, as a rule, in the case of the sale or purchase of a company, equity interest, lending, project financing, improving the efficiency of enterprise management, etc. Situations often arise when several reasons are combined.

When is a business valuation needed?

An increase in the value of a business is one of the important indicators of the growth of its profitability; a decrease indicates the need for changes in the management system and development strategy. Both the owner of the enterprise and a third party may be interested in conducting an objective assessment.

The enterprise value is determined by:

• management effectiveness assessment;
• corporatization;
• reorganization;
• use of mortgage lending;
• taxation upon inheritance, gift;
• participation in the activities of the stock market;
• assessment of allocated business shares during a merger in the form of consolidation and expansion;
• partial or complete liquidation;
• issue of new shares, etc.

A business assessment may be needed not only by a potential investor or owner of an enterprise, but also by other market participants, for example, insurance companies (to determine the amount of risk, confirm compliance with the risk sharing agreement between the client and the policyholder), credit institutions (to assess solvency, determine the optimal amount of the maximum loan), as well as government agencies, shareholders, suppliers, manufacturers, intermediaries. The final result of the assessment can be presented in one report in several sections or in two different documents. The assessment of the enterprise is carried out in accordance with the set goal, which is formulated by the customer when drawing up the Agreement and the Assessment Task. They must comply with the Federal Law “On Valuation Activities in the Russian Federation”, the provisions of the “National Code of Ethics for Appraisers of the Russian Federation” and the Federal Valuation Standards.

Business valuation methods

Before investing or purchasing a business, the buyer first of all evaluates its usefulness for himself. It must meet his individual income needs. It is the latter indicator, taking into account costs, that is the basis of the market value that the appraiser calculates. The principles, methods and approaches to its definition are chosen based on the specifics of the business as a “product”: investment potential (they invest money in it, expecting to make a profit in the future), systematicity (it can be sold as a system or individual elements), need (depending on the situation inside production and in the external environment). The valuation process consists of several stages performed by an appraiser to objectively determine the value of a business:

• concluding an assessment agreement with the customer;
• determining the characteristics of the assessment object;
• market analysis;
• selection of assessment methods, carrying out calculations;
• generalization of the results obtained within each approach, determination of the final value of the object;
• preparation and delivery of a report to the customer.

At the fourth stage, the appraiser selects one or more optimal approaches to assessing the enterprise, which will be most effective in a particular situation. Business valuation methods are universal, but they are selected individually in each situation.

Expensive

This approach implies a set of methods for assessing the value of an object, which are aimed at determining the costs required for restoration and replacement of an enterprise, taking into account costs, wear and tear of equipment and other factors. It allows you to track absolute changes in balance sheet with its possible adjustment as of the valuation date (in the opinion of an independent appraiser) - data on current market prices for labor, materials and other costs are used.

Profitable

The income approach means a set of methods for assessing the value of an object, which are based on determining the amount of expected income from a business. In this case, the key factor determining the value of the property is income. The larger it is, the higher its market value. Here, experts apply the evaluative principle of expectation, taking into account the period of obtaining potential income according to the plan, the number and degree of risks. For the analysis, capitalization ratios are used, which are calculated based on market data. This valuation method is considered the most effective and convenient for determining the value of a business (only in some cases the comparative or cost method is more accurate). This approach is best used if the company’s income is stable.

Comparative

The comparative method of determining the value of an enterprise means a set of valuation methods that are based on comparison of the object of assessment with competing objects (with similar characteristics, availability of information on transaction prices). Experts believe that it is he who gives the most accurate results (of course, provided active work market of properties with similar parameters). This approach uses market data for similar objects and the method of capital market, transactions and industry ratios (with elements of benchmarking).

Important: It is worth noting that each approach makes it possible to emphasize and objectively analyze certain characteristics of the object of assessment, but they are all interrelated.

How to estimate the value of a business?

Specialized companies evaluate businesses and other objects. To assess the value of an enterprise, you need to contact specialists, clearly indicate the purpose of determining the value and sign the Agreement. According to Decree of the Government of the Russian Federation of December 2007 No. 60, the assessment process must take place in several stages:

1. Definition of the object (description, rights to it, date and basis of assessment, limiting conditions).
2. Concluding an agreement to conduct an assessment (identification and preliminary inspection of the object, selection of type, sources of necessary data, selection of personnel, development of an assessment plan, drawing up and concluding an agreement, payment for services).
3. Determination of object characteristics (collection and verification of data, determination of external and internal information).
4. Market analysis (includes analysis of financial ratios, reports, adjustments financial statements for evaluation purposes).
5. Selecting methods within a specific approach (or several), carrying out the necessary calculations.
6. Summarizing the results, determining the final cost of the object.
7. Drawing up and submitting a report to the customer.

Selecting an appraisal company

The appraisal company is the organizer of the appraisal project and assists the appraiser in conducting it. professional activity, provides marketing, financial and information support. It provides services not only to business owners, but also to legal entities, financial institutions (most often banks), insurance companies and government agencies. Valuation services are usually paid for by the owner of the property, but often the other party puts forward certain demands regarding the appraiser company. When choosing an appraisal company, you need to collect as much objective information about it as possible and make sure of its competence and professionalism. Particular attention should be paid to the following factors:

• period of work on the market;
• customer reviews;
• business reputation;
• position in the ratings of independent specialized agencies and publications (but it is important to pay attention to the rating criteria; it should be formed from generalized indicators; you can use data, for example, from the banki.ru resource, which displays the degree of customer satisfaction with the services of different banks, and see with what ratings companies they cooperate with);
• documents (Certificate of state registration legal entity, copies or scans of constituent documents, etc.);
• awards, certificates, diplomas;
• the amount of liability insurance (the higher it is, the safer it is for the customer).

The appraisal company must prove itself as an organization that produces correct results and offers the services of objective experts who are not motivated by a third party.

Submission of required papers

To start the assessment process, the business owner must provide a package of documents. Its positions depend on the purpose of the exercise, the form of ownership and the criteria for forming the assessment. Many appraisal companies have launched websites where you can submit an application online or by phone (but you only need to submit documents in person). The basic package includes the following papers:

1. Certificate of Incorporation or Articles of Association.
2. For joint-stock companies – reports on the results of issuing securities, an extract from the register of shareholders.
3. Documents showing the organizational structure and activities of the facility.
4. Accounting statements for the last 3-5 years, sometimes additional explanation is needed for some balance sheet items.
5. Copies of patents, licenses.
6. If necessary, documents confirming ownership of real estate.

Advice: It is important to consider that each appraisal company has its own operating methodology. Sometimes, in addition to the basic set of documents, additional papers are required from the customer, for example, a development plan for the next few years, drawing up an investment project, an auditor’s report, an explanatory note from the owner describing the company and indicating the number of staff.

Valuation model agreement

The dynamic economic situation in the country and the world makes it necessary to develop an individual model for each assessment. The study of the same object is rarely repeated, but in this case it is impossible to reproduce the same assessment. As a basis, appraisers use generally accepted models. Their choice must be agreed upon with the client based on the goals and objectives of the project. The optimal model should take into account not only the financial aspect, but also help in assessing the level of corporate governance, have the potential and act as an independent method for assessing the value of a business.

Basic business valuation models:

1. Economic value added (EVA).
2. Market value added (MVA).
3. Shareholder value added (SVA).
4. Total shareholder return (TSR).
5. Added thread Money(Cash value added - CVA).

Receive a report with results

Business valuation - example

A business assessment report can be submitted both in text format and in the form of tables or with their active use. For example, consider the valuation of an enterprise using the net asset value method (cost approach). It is most often used if the enterprise has significant tangible assets (or very few of them), the percentage of total costs in the cost of the product or service is insignificant, cash flow has been subject to significant fluctuations in recent years and if the enterprise does not have fully depreciated assets that are currently bring in income.

Let's look at an example based on the table:

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Business valuation is necessary not only for conducting purchase and sale transactions and calculating the collateral value, but also for other purposes, for example, to determine the effectiveness of management. In the course of completing the assigned task, the expert takes into account, in addition to the costs of creating an enterprise, market factors that may affect the cost, and also uses technological, organizational and financial analyses. Valuation activity is a vital part of any developed state, because the results of value assessment become the basis for making important economic and managerial decisions in the private and public sectors.

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In the theory and practice of business valuation, there is traditionally a certain classification of approaches to business valuation based on the source data used.

In international professional practice, which is also used by Russian appraisers, the following three main approaches are distinguished for assessing the value of an enterprise:

1. Income approach;

2. Cost approach (or asset based);

3. Comparative approach. .

The BSV-I standard defines these approaches as follows:

The income approach is a general way of determining the value of an enterprise and/or its equity capital, which uses one or more methods based on the suppression of expected income. This approach itself is regulated by the BSV-VII standard.

The cost approach is a general method of determining the value of an enterprise and/or its equity capital, which uses one or more methods based directly on calculating the value of the enterprise's assets minus liabilities. The approach is regulated by the BSV-IV standard.

The comparative approach is a general method of determining the value of an enterprise and/or its equity capital, which uses one or more methods based on comparing a given enterprise with similar ones (the approach itself is regulated by the BSV-VI standard).

It should be noted that none of the listed approaches are not only mutually exclusive, but also complement each other.

Let's consider each approach to assessing the value of a business in more detail.

The income approach is the determination of the present value of the future income expected to be generated by the use and eventual future sale of the property. The income approach is a generally accepted approach to assessing the market value of an enterprise (business), the share of shareholders in the capital of an enterprise or securities, which uses one or more methods based on the conversion of expected income into value. In this case, the evaluative principle of expectation is applied. Although, as a rule, the income approach is the most appropriate procedure for valuing a business, it is also useful to use the comparative and cost approaches. In some cases, cost or comparative approaches may be more accurate or more effective. In many cases, each of the three approaches can be used to verify the property value estimates obtained by the other approaches.

Determining the market value of an enterprise (business) from the perspective of the income approach is based on the assumption that a potential investor will not pay for this business more than the current value of future income received as a result of its operation (in other words, the buyer acquires the right to receive future income from owning the enterprise) . Likewise, the owner will not sell his business for less than the present value of projected future earnings. It is believed that as a result of their interaction, the parties will come to an agreement on a market price equal to the present value of future income.

The income approach is a procedure for estimating the value of a business on the basis that the value of a business is directly related to the present value of the future net income that the business will generate. The current value of the amount of future income serves as a guide to how much a potential investor is willing to pay for the company being valued.

Expected income, as understood within the income approach, has only a monetary value. Depending on the nature of the enterprise (business) being valued, the share of shareholders in its capital or securities, as well as other factors, expected income can be quite accurately expressed through indicators such as net cash flow, dividends, various shapes arrived. Expected income should be assessed based on such characteristics as the nature of the enterprise (business); its capital structure; performance indicators of related enterprises taken in retrospect; prospects for the development of this enterprise and the industries with which it is associated, as well as other economic factors.

Conversion of expected income into enterprise value is carried out using procedures that take into account the expected growth rate, time and frequency of receipt of income, the degree of risk of obtaining income at the planned time and in the expected volume, as well as the value of money over time. When converting expected income into value, it is usually necessary to determine the value of the capitalization factor or discount rate. When determining the appropriate rate, it is necessary to take into account such factors as the level of the bank interest rate, the rate of return for similar enterprises according to the expectations of investors, as well as the characteristics of the risk associated with obtaining the expected income.

When discounting future earnings techniques are used, expected growth rates are taken into account when estimating future earnings. When using income capitalization methods, the value of the capitalization rate directly depends on the expected growth rate.

This approach is the main one for assessing the market value of existing enterprises, which, after their resale to new owners, are not planned to be closed (liquidated). In relation to an existing enterprise, this method involves considering the results of forecasting the activities of this enterprise in accordance with the technologies available to it for producing products (performing work, services).

Within the framework of the income approach to business valuation, there are traditionally two main methods (or two groups of methods, depending on the level of detail): methods based on recalculating the company's future annual income into current value (income discounting methods); methods based on average income (methods of income capitalization).

Income in business valuation can include enterprise profit, revenue, paid or potential dividends, and cash flow. Depending on what is chosen by the appraiser as income, the following discounting and capitalization methods are distinguished: profit discounting method, discounted dividend payment method, discounted cash flow method; normalized profit capitalization method; revenue capitalization method; method of capitalization of dividend payments, method of capitalization of normalized cash flow.

The discounted cash flow method can be used to value any business. According to Western experts, in 90% of cases where the income approach is used to evaluate medium and large enterprises, this method is used. This method is the most labor-intensive and expensive, but in existing Russian conditions the most correct. The advantage of discounting cash flow over discounting profits and dividends is that currently neither profits nor dividends sufficiently reflect the state of Russian enterprises and organizations, as well as the preferences of investors.

Income discounting methods involve drawing up a clear forecast of the dynamics of an enterprise's development, as a rule, for the next 3-7 years, that is, right up to the moment when fluctuations in growth rates can be neglected. All predicted income is then discounted, that is, its future value is reduced to the value of this money at the valuation date. Thus, the main tasks when using discounting methods are as follows: a) correctly predict the future income of the enterprise; b) take into account possible risk factors in the discount rate.

The discounted cash flow method is used when future cash flows can be reasonably predicted, these flows will differ significantly from current ones, and it is expected that the cash flow will be Last year forecast period will be a significant positive value. In other words, the method is more applicable to income-generating businesses that have unstable income and expense streams.

In contrast to the discounting method, the capitalization method assumes that in the future all income of the enterprise will be either the same amount or will have a constant average annual growth rate. This approach is, to a certain extent, simpler, since it does not require the preparation of medium- and long-term income forecasts. However, the time for a method based on income capitalization will come a little later: when the stage of stable development of the country begins. Today, the use of capitalization in business valuation is limited to the largest Russian enterprises with relatively stable incomes, at the maturity stage of their life cycle, whose sales market is established and will not undergo significant changes in the long term.

The cost approach considers the value of an enterprise from the point of view of the costs incurred (essentially, the amount of costs for creating the enterprise being valued in its current state and in the market environment, or the proceeds from the sale of existing assets, is calculated).

The cost approach is most applicable for assessing objects special purpose, as well as new construction, to determine the best and most efficient use of land, as well as for insurance purposes. The information collected typically includes land prices, construction specifications, wages, materials costs, equipment costs, profits and overheads for local builders, and the like. The required information depends on the specifics of the object being assessed. This approach is difficult to apply when assessing unique objects that have historical value, aesthetic characteristics, or obsolete objects.

The cost approach to estimating enterprise value is based on the principle of substitution, the principle of highest and best use, balance, economic magnitude and economic division. The book value of an enterprise's assets and liabilities due to inflation, changes in market conditions, and accounting methods used, as a rule, does not correspond to their real value. As a result, there is a need to adjust the balance sheet of the enterprise. To accomplish this, the market (or other) value of each asset on the enterprise’s balance sheet is first assessed separately, then the market (or other) value of the liabilities is determined. After this, the value of liabilities is subtracted from the adjusted value of assets, resulting in the market value of the company's equity. To carry out such calculations, data from the balance sheet of the enterprise is used as of the valuation date (or as of the last reporting date), the items of which are adjusted taking into account the market (or other) value of its assets and liabilities.

The cost approach is represented by two main methods: the net asset method and the liquidation value method. The specific implementation of the cost approach depends on the state of the enterprise, namely, whether it is operating and promising or is in a state of decline, in which a separate sale of assets is most appropriate.

The net asset value method is based on an analysis of the assets of the enterprise; the use of this method gives the best results when assessing an operating company that has significant material and financial assets. The main feature of the method is that the assets and liabilities of the enterprise are valued at market or other value.

Typically, the asset accumulation method (this name seems to appraisers to better reflect the economic meaning of such a calculation model) is used in the following cases: the enterprise has significant material assets; it is possible to identify and evaluate intangible assets, if any; the business is expected to continue to operate; the entity does not have historical earnings data or is not reasonably able to reliably estimate its future earnings or cash flows; the enterprise is quite dependent on contracts or there is no permanent, predictable clientele at all; a significant part of the enterprise's assets are financial assets (cash, accounts receivable, etc.).

Moreover, within the framework of the net asset value method used in assessing the business of an enterprise in the process of restructuring, individual objects (intangible assets, long-term financial investments, buildings, machinery, equipment) can also be assessed using the income and comparative approach. The procedure for such an assessment involves the following sequence of steps:

determining the market value of all assets of the enterprise > determining the value of the enterprise's liabilities > calculating the difference between the market value of assets and liabilities

The second method, the liquidation value method, is used when the enterprise is in the process of bankruptcy, or there are serious doubts about the ability of the enterprise to remain in operation and/or bring an acceptable income to the owner. The peculiarity of this method is the fact that the amount of the calculated value of the enterprise is significantly influenced by the forced sale, and in this case we are talking about the sale of the enterprise in parts. This leads to the fact that the liquidation value of the enterprise is significantly lower than the market value.

The valuation theory contains the following provision: liquidation value (proceeds from the liquidation of an enterprise after satisfying all creditors' claims from funds received from the sale of its assets) is the absolute lower limit of the market value of the enterprise.

The comparative approach assumes that the value of an enterprise's equity is determined by the amount for which it can be sold in the presence of a sufficiently formed market. In other words, the most probable price for the value of the business being valued may be the actual selling price of a similar (analogous) enterprise recorded by the market.

The theoretical basis of the comparative approach, which proves the objectivity of its application, are the following basic provisions.

Firstly, the expert appraiser uses as a reference the prices actually formed by the market for similar enterprises or their shares. If there is a developed financial market the actual purchase and sale price of the enterprise as a whole or one share most integrally takes into account numerous factors influencing the value of the enterprise's equity capital. Such factors include, first of all, the ratio of supply and demand for a given business, the level of risk, prospects for industry development, specific features of the enterprise and much more, which ultimately facilitates the work of an appraiser who trusts the market.

Secondly, the comparative approach is based mainly on the principle of alternative investments. An investor, when investing in any stock, buys, first of all, future income. The production, technological and other features of a particular business are of interest to the investor only from the perspective of the prospects for generating income. The desire to obtain the maximum return on invested capital with an adequate level of risk and free placement of investments ensures the equalization of market prices.

Thirdly, the price of an enterprise reflects its production and financial capabilities, market position, and development prospects. Consequently, in similar enterprises the relationship between price and the most important financial parameters, such as profit, dividend payments, sales volume, and book value of equity capital, must be the same. A distinctive feature of these financial parameters is their decisive role in generating the income received by the investor.

The comparative approach has a number of advantages and disadvantages that a professional appraiser should take into account.

The main advantage of the comparative approach is that the appraiser focuses on the actual purchase and sale prices of similar enterprises. In this case, the price is determined by the market, since the appraiser is limited only to adjustments that ensure the comparability of the analogue with the object being valued. When using other approaches, the appraiser determines the value of the enterprise based on the calculations he has made.

The comparative approach is also based on retroinformation and, therefore, reflects the results of production and financial activities actually achieved by the enterprise (business), while the income approach is focused only on forecasts regarding future income.

Another advantage of the comparative approach is the real reflection of supply and demand for the investment object, since the price of the actual transaction more accurately takes into account the market situation.

However, the comparative approach has a number of significant drawbacks that limit its use in modern valuation practice. Firstly, the basis for calculation in this approach is the financial results achieved in the past; therefore, the method ignores the prospects for the development of the enterprise in the future. Secondly, a comparative approach is possible only if the most comprehensive financial information is available not only for the enterprise (business) being valued, but also for a large number of similar enterprises selected by the appraiser as analogues. Receipt additional information from analogue enterprises is a rather complex and very expensive process.

Thirdly, the appraiser must make numerous and rather complex adjustments, make adjustments to the final value and intermediate calculations that require serious justification. This is due to the fact that in real practice there are no absolutely identical enterprises. Therefore, the appraiser is obliged to identify these differences and determine ways to level them out in the process of determining the final value.

The possibility of applying the comparative approach in real economic practice primarily depends on the presence of an active financial market, since this approach involves the use of data on actually completed transactions. The second condition is the openness of the market or the availability of financial information required by the appraiser. The third necessary condition is the presence of special services that accumulate price and financial information, and the formation of an appropriate data bank can facilitate the work of the appraiser, since the comparative approach is quite labor-intensive and expensive.

The comparative approach involves the use of three methods, the choice of which depends on the goals, object, and specific conditions of assessment: the peer company method, the transaction method, and the industry coefficients method.

The peer company method, or capital market method, is based on the use of prices generated by the open stock market. The basis for comparison here is the price of one share of open joint stock companies (JSC). The advantage of this method is the use of actual information rather than predictive data that has known uncertainty. To implement this method, reliable and sufficiently detailed financial and market information is required for a group of comparable enterprises and the enterprise being valued itself. The selection of comparable enterprises (so-called analogues) is carried out based on an analysis of similar enterprises by industry, type of product, diversification of products (services), life cycle, geography, size, business strategy, various financial characteristics (profitability, growth rates, etc.). In its pure form, this method is used only to assess the level of value of a minority (non-controlling) stake.

The transaction method or sales method is focused on the acquisition prices of the enterprise (business) as a whole or its controlling stake. This determines the most optimal scope of application of this method - assessment of the value of 100% capital, or assessment of a controlling stake.

The method of industry coefficients or the method of industry ratios is based on the use of recommended relationships between price and certain financial parameters. Industry ratios, as a rule, are calculated by special analytical organizations on the basis of long-term statistical observations of the relationship between the price of equity capital of a particular enterprise and its most important production and financial indicators.

Typically, the comparative approach is used in the following cases: when there is a sufficient number of comparable (really similar to the one being assessed according to the most important economic parameters) enterprises and transactions with them (partial interests in them); there is sufficient data on comparable enterprises (and transactions) to carry out appropriate financial analysis; and there are reliable data on the profits or cash flows of both the subject and comparable enterprises.

As a result of the approaches to assessing the value of a business discussed above, it is possible to identify the advantages and disadvantages of valuation methods (Table 1).

Table 1

Comparative characteristics of approaches to business valuation

	Advantages	Flaws
Expensive	*Takes into account the influence of production and economic factors on changes in the value of assets. * Gives an assessment of the level of technology development, taking into account the degree of depreciation of assets. * Validity of the results, because calculations are based on financial and accounting documents	* There are no connections with the present and future results of the enterprise. *Does not take into account the market situation at the valuation date. * Does not take into account the development prospects of the enterprise. *Static. *Does not take into account risks. *Reflects past value.
Profitable	* Takes into account future changes in income and expenses. * Takes into account the level of risk (through the discount rate). * Takes into account the interests of the Investor.	* Difficulty in predicting future results and costs. * Multiple rates of return are possible, making it difficult to make a decision. * Does not take into account market conditions. * Labor intensity of calculations
Market	*Based on real market data. *Reflects current sales and purchasing practices. * Takes into account the influence of industry (regional) factors on the price of the company's shares.	*Does not sufficiently clearly characterize the features of the organizational, technical, financial preparation of the enterprise. *Only retrospective information is taken into account. * Requires many amendments to be made to the analyzed information. *Does not take into account investors' future expectations

The choice of priority for one or another approach and method for assessing the value of an enterprise is determined by the purpose and function of the assessment, as well as the characteristics of the enterprise being valued. If the valuation is carried out for tax or insurance purposes, the cost approach is chosen. If a company is being valued for the purpose of sale, then all three approaches are applied. If an investment project is being evaluated, then the main approach that the investor will be interested in will be profitable.

When the selection of the necessary assessment methods has taken place, calculation procedures come into play. At the end of the calculation process, 2-3 numbers appear (depending on the number of methods selected) reflecting the value of the enterprise. The final value of an enterprise is determined by one of two basic methods: mathematical weighing and subjective (expert) weighing. When choosing the specific weight of each assessment method, the following factors are taken into account:

The nature of the business and its assets;

Purpose of valuation and definition of value used;

The quantity and quality of data supporting each method.

Whether the value of a business is calculated using forward-looking methods or based on historical data, business valuation is based on a number of key variables. Their relative importance may vary depending on the specific situation, but the value judgment is influenced by internal variables that require adjustment, such as:

1. The size of the assessed share of the business (controlling or minority);

3. Liquidity of the share and/or business;

4. Provisions limiting property rights;

5. Financial situation of the assessed object, etc.

Moreover, the sum of the values ​​of all individual blocks of shares (shares of a business) may be equal to or may differ from the value of the enterprise as a whole. In most cases, the sum of the values ​​of individual packages (shares) is less than the cost of the entire enterprise if it were acquired by one buyer. This fact is explained by the fact that ownership of an enterprise, valued as a whole, is associated with rights and interests other than the sum of all interests taken on a minority basis.

Increasingly, funds are invested in a business for the purpose of subsequent resale/purchase or merger with other organizations to make a profit. And here the question arises: “How to estimate the value of a business taking into account all investments?”

Express assessment “on the knee”. If you have a simple business and need a valuation, then calculate it as follows: “profit for 1 - 2 years + property” and sell.

Types of cost

First of all, let's look at the types of business valuation. Different classifications give us different types cost, but I decided to stick with the basic ones. By the way, each type pursues its own goal and objectives for assessing a business, then you will understand why this is necessary.

I would also like to note that these types of valuations relate to existing businesses.

1. Market

The price of selling/buying a business under market competition.

The market value will be the price of all the organization’s property, taking into account the income that can be received in the future.

This business value is determined when it is necessary to find out the organization’s place in the market for conducting M&A transactions (mergers or acquisitions), selling a business or adjusting long-term development.

Determining market value when valuing a business is based on in-depth analysis and cash flows.

Example (simple)

Let us analyze the market value of a business using the example of OJSC Romashka. The founder wants to adjust the development strategy. And for this he makes the following table:

We see that the price of the business over the year has increased by 320,000 rubles, which indicates the positive growth rate of Romashka OJSC, the business is going uphill.

2. Investment

The value of a property for specific investment purposes.

It is calculated when business owners decide to launch investment projects. Or the organization is being considered by investors for investment.

Depending on the projected return on investment, the cost of this type may be either higher than the market or lower.

Example (simple)

JSC Romashka is planning a strategic partnership with JSC Oblachko. The partnership is considered as an investment project.

In this case, to evaluate the business, it is necessary to determine the investment value of the partnership; to do this, we will predict the benefits that we can get from a merger with another company.

The investment cost of the business when implementing the partnership project in 5 years will be 11,756,723 rubles, which is beneficial for OJSC Romashka. This example with calculations is discussed in more detail below, in paragraph.

3. Restorative (current)

The sum of all costs of creating and operating a business, including assets.

It is necessary when the top management of an organization makes a decision on property insurance, also if the founders decide to revalue assets. And also when it is necessary to optimize the existing taxation system.

Example (simple)

The management of Romashka OJSC considers it necessary to insure the business against risks, while the business was opened 5 years ago. In this case, for insurance purposes, assets are revalued and the replacement cost of the business is determined.

During this time, fixed assets (equipment, real estate) have dropped significantly in price, which reflects the replacement cost of the business.

Revaluation of equipment and real estate in 2018 led to a decrease in the value of the business, compared to 2013, by 700,000 rubles.

4. Liquidation

The monetary value of a business minus all costs associated with selling it.

Such a cost estimate is needed when, due to unforeseen circumstances, it is necessary to close the business as soon as possible.

It is important to remember that during an emergency sale of a product, its value becomes lower than the market value, and the same is true with the sale of a business.

Example (simple)

OJSC Romashka is closing due to high market prices. In this case, the price of all property is determined based on the latest reporting data.

From the amount received, all debts to contractors and partners, payments to employees, payment of commissions to realtors for the sale of real estate, and costs of maintaining equipment in good condition until the time of sale are deducted.

Do not forget that even during liquidation, the organization can make a profit.

The difference between the value of the property and the costs during the liquidation period for OJSC Romashka amounted to 5,500,000 rubles.

Approaches to valuation

There are three ways to value a business. And according to Russian legislation, the appraiser (yes, that’s right, it’s not you who is appraising) is obliged to use all three approaches, and if one of them is not used, then explain in detail why.

1. Profitable

The income method of business valuation is based on the forecast of profit from the operation of the business. Thus, the company's future income is reduced to its current value.

In other words, the higher the organization's planned income, the higher the current price of the business.

1.1 Direct capitalization method

Based on the organization's income adjusted for projected business growth rates.

This method is suitable for organizations that plan to maintain or increase the growth rate and profitability of their business, that is, for large, steadily growing companies. In this case, the evaluation formula is as follows:

Where “V” is the value of the business, “I” is the organization’s income, “R” is the capitalization rate.

Income is calculated according to the financial results statement reflected in Form No. 2 of the financial statements. Most often, these data are taken over a period of 3-5 years and averaged.

If information on income can be found in the statements, then the capitalization rate (R) must be calculated using the formula:

R = Discount Rate – Projected Average Growth Rate of Company Revenue

Example

The purpose of cost assessment is to improve management efficiency. Note: In 2017, the value of OJSC Romashka was estimated at 7,500,000, with income of 1,350,000 rubles.

Let’s say that OJSC Romashka in 2018 had income of 1,098,000 rubles. We divide this value by the capitalization rate and get the value of the business equal to RUB 7,320,000.

So, after current calculations, we see that the organization is losing ground, business growth rates are decreasing, and the efficiency of cash flow management has become less effective.

1.2 Method of discounting estimated cash flows

This method is based on the fact that the money and assets a company has now are worth more than the same money and assets in the future.

The discounting method is used to estimate the value of a large business that is exposed to various environmental factors, for example, seasonality of income.

Cash flow– this is an influx of cash into the company.

Discounting cash flows occurs by multiplying the cash flow by the discount factor using the formula:

Discounted Cash Flow Formula

Where “DCF” is discounted cash flow, “r” is the discount rate, “n” is the number of periods for calculating cash flows, “i” is the number of the period.

Example

The purpose of the valuation is to determine the effect of the merger of OJSC Romashka with OJSC Oblachko

Let's say OJSC Romashka is part of a partnership with income of 7,300,000 rubles. per year, and after 5 years of partnership seeks to receive an income of 9,000,000 rubles, with an income rate of 10% per annum. How to determine whether a given project is profitable?

Cost of investment = (9,000,000) / (1 + 0.1) ^ 5 = 5,588,291.9 rubles.

Using basic calculations, it turns out that after 5 years, Romashka OJSC will be able to receive the desired income by investing only 5,588,291.9 rubles. Therefore, the alliance between Romashka OJSC and Oblachko OJSC is profitable.

2. Comparative

In this business valuation method, the entity being valued is compared with similar companies. Similar companies must be similar in economic, material, technical and other conditions.

After selecting analogue companies, suitable multipliers are calculated for them, that is, the ratio of the selling price and economic indicator.

The value of a business using the comparative valuation method is calculated by multiplying the resulting multipliers by the key financial indicators of the organization being valued.

2.1 Transaction method (sales method)

This method is based on an analysis of market prices for the purchase or sale of controlling or one hundred percent stakes in organizations similar to the business being valued.

After calculating and applying multipliers, the resulting business value is reduced to a weighted average. When using the transaction method, the following formula is used:

Business value (capitalization) = Indicator * Multiplier

Example

The purpose of the assessment is the sale of the business. Therefore, it is necessary to evaluate 100% of all issued shares of OJSC Romashka.

We will take the initial data from the financial statements: revenue = 730,000 rubles, value of assets = 410,000 rubles.

After studying the market and external environment, we chose three analogue companies. Since these are public companies, their reporting is open to external users, so we can easily display multipliers that interest us.

The table below shows data from peer companies, calculated multipliers and indicators of Romashka OJSC.

To determine exact value multipliers, it is necessary to display the weighted values ​​of the multipliers (we have 9.30 and 14.20).

• According to the P\R multiplier – RUB 6,789,000;
• According to the P\R multiplier – RUB 5,822,000.

However, the final cost of the business should be the same, so next it is necessary to weigh the resulting values.

If we assign a weight to the P\R multiplier - 0.8, and to the P\A multiplier - 0.2, then using basic calculations we get the final value of the Romashka OJSC business equal to 6,595,600 rubles.

The method does not require further adjustment for the degree of control, since the prices for controlling stakes in peer companies were used as initial information.

2.2. Capital market method

This method is based on an analysis of the prices of shares of peer companies available on the market in public circulation.

In this case, specialists use multipliers, where the numerator is the share price, and the denominator is a financial indicator, for example, revenue or profit.

This method uses per-share adjustments to financial measures, such as earnings per share. Otherwise, this method is identical to the transaction method:

Business value = Revenue * (Price per share) / (Revenue per share)

Example

The purpose of the assessment is the sale of OJSC Romashka. Despite the fact that the company over the past few years has received an annual profit of 100,000 rubles.

The ratio “price per share / earnings per share” (adjusted per share) for similar peer companies is 7. How to find out how much Romashka OJSC is worth?

The value of OJSC Romashka = (annual profit) x (multiplier “price per share / earnings per share”)

100,000 x 7 = 700,000 rub.

2.3 Industry coefficient method

This method is based on the use of pre-calculated and analyzed relationships between the sales price of a business in a certain industry and its financial performance.

For example, marketing agencies can be sold for 0.9 annual revenue, consulting agencies - for 0.7 annual revenue.

In Russia, the method of industry coefficients has not yet become widespread, since there is no deep analysis of industry indicators by statistical and specialized services.

Example

The purpose of the assessment is to adjust the business development strategy. To do this, we calculate the annual revenue, which is equal to 6,500,000 rubles.

OJSC “Romashka” operates in the field of wholesale flower sales. According to market analysis, an industry coefficient of 1.8 can be derived.

So, with a business value of 11,700,000 rubles. with revenue of 6,500,000 rubles, the management of Romashka OJSC can decide to expand the network.

3. Expensive

The cost method of valuation determines the value of a business as the price of the company's existing assets. To apply this approach, the appraiser must have access to reliable information about the costs of acquiring and maintaining assets.

3.1 Net asset method in business valuation

This method is based on asset analysis. The first step is to evaluate intangible assets. Next comes the analysis of inventory items and inventories. Then a detailed assessment of non-cash assets (accounts receivable) is made.

The net asset method is quite simple to calculate; the value of a business is determined by the formula:

Example

The purpose of the assessment is to identify the value of OJSC Romashka for business insurance against credit risks.

It is necessary to determine the amount of assets and debts of OJSC Romashka. Thus, all assets are determined at 4,573,100 rubles, and debt liabilities at 2,546,900 rubles. Thus, the cost of OJSC Romashka is estimated at 7,120,000 rubles.

As a result of the assessment, it was determined that Romashka OJSC can be insured for 7,120,000 rubles.

3.2 Salvage value method

It is used in the case when it is already known for sure that the business will be liquidated, and the owners need to determine the value of the business for quick implementation. Calculation formula:

Business value = Market value of assets – debt obligations

Since the company is being liquidated, we will calculate the proceeds from the sale of equipment, inventories and materials, adjusted for quick sales.

Thus, the market value of the assets of OJSC Romashka is determined at 5,213,100 rubles. At the same time, the cost of maintaining and servicing equipment and inventories until the moment of sale will amount to RUB 543,000.

Behind Lately the organization has accumulated significant debts to creditors, which amount to 1,876,000.

Also, upon closure, it is necessary to pay all severance benefits to employees, which total RUB 665,200. Profit for the liquidation period will be 4,871,100 rubles.

As a result, the value of OJSC Romashka using the liquidation value method is determined at 7,000,000 rubles.

Conclusions on methods

After a detailed consideration of all approaches to business valuation, it is advisable to structure the information received and derive the advantages and disadvantages of each method.

An approach	Advantages	Flaws	Best situation for the method
Profitable	Analysis of future income; takes into account the characteristics of the company; universal, suitable for various assessment purposes; identifies business weaknesses	Forecast data is used; complexity of calculations; subjective and probabilistic nature of the results; inaccurate results	Improving management efficiency; justification for the decision to launch an investment project
Comparative	Actual market data is used; evaluates effectiveness under current conditions	Does not take into account investor expectations; difficulty finding similar objects in some industries	Making a decision on an additional issue of shares; change in development strategy; buying or selling a business; restructuring
Expensive	Assets are assessed; the accuracy of the assessment is justified; calculations are very simple, information is available	Development prospects are not taken into account; reflects the past value of the business; the price may not correspond to current market prices	Liquidation or quick sale; revaluation of assets; assessment of the organization's financial performance; solvency of the company and the value of collateral for lending, insurance

Note on Methods

So, after calculations have been made using the three methods, it is necessary to identify the final result. By the way, the costs should be approximately the same.

The evidence differs mainly because one particular approach fits the purpose of the assessment more than others or takes more fully into account the current situation. Coordination is carried out according to the formula:

Total cost = Profitable × K1 + Comparative × K2 + Costly × K3

“K1”, “K2”, “K3” – weighting coefficients selected depending on the significance of a specific cost in the final assessment. The coefficients must add up to one.

Example

Let's look at the already familiar Romashka OJSC. The calculation data is in the table below.

Explanation of the coefficients: the appraiser believes that the comparative one is the most significant in this case, therefore it is assigned the maximum weight.

So, after calculating according to the formula, the final agreed value of the business is determined to be 6,924,200 rubles.

Wow! I thought we'd count it once and that's it

Step-by-step instruction

In this chapter, I will tell you the main stages of assessing the value of a business. Naturally, every business has its own nuances, it is important to remember this.

1. Defining the goal

The first step is to determine for what purposes the business valuation is being carried out. This step is important for realizing the economic interests of the parties who came to a decision on business valuation. And most often the assessment is carried out in the following cases:

1. Increase the management efficiency of the organization;
2. Justify the decision to launch an investment project;
3. Buy or sell a business, or its share;
4. Restructure the enterprise;
5. Develop a long-term development strategy;
6. Assess the financial performance of the organization;
7. Make a decision on the issue and sale of securities.

2. Selecting an appraisal company

This is a very important step. In many countries, business valuations are carried out by independent professionals who adhere to established industry standards in their work.

A good tool that can help when choosing an appraiser is the ratings of verified agencies, such as:

1. Rating agency Expert;
2. Kommersant Publishing House;
3. Rating agency RAEX.

The main criteria when choosing an appraiser may be the period of work on the market, professionalism and reputation, the presence of a list of well-known partners who have already used the services of the company, positive

From this article you will learn:

• What is company value and why is it needed?
• What types of company value are there?
• How to calculate the value of a company
• How to quickly calculate the value of a company
• What are the features of company value management?
• How to increase company value

A business exists not only to receive funds for the goods or services for which it was created. Business is also an investment. Many entrepreneurs make money by organizing and launching new companies with the aim of further selling them. Although this is far from the only reason for selling a business. When a company goes bankrupt or cannot solve its problems on its own, there is often a need to assess the value of the company before selling it. In this article we will talk about how to understand everything related to the value of your business and avoid difficulties.

Why is it necessary to know the value of a company?

Now the overwhelming majority of companies in Russia do not consider assessing the value of a company to be something necessary, and their owners often do not see the point in this until the business reaches high speeds and the public arena. Until then, the assessment is perceived as a reason for the owner’s personal pride.
There are actually about twenty economic goals for calculating the value of a company, but there are only three most important ones:

1. This provides objective data on the state of the business and the effectiveness of the management apparatus in it. By reacting to them, owners can always correct course in time.
2. It is impossible to approach investors for additional cash injections without information about the real value of the company, otherwise you risk not getting what you came for.
3. Valuation allows you to take into account assets that arose during the economic activity of the company in an extremely correct and competent manner.

Of course, assessing the value is necessary not only for buying or selling a ready-made business. This indicator is important For strategic management company. A clear understanding of the value of your company will also be required when issuing securities, shares and entering the stock market. It is also significant that no investor will agree to invest their money where the company’s value has not been assessed.
Enterprise business valuation (business valuation)- nothing more than determining the value of the company as non-current and current assets that can bring profit to the owners.

When conducting an assessment examination It is necessary to estimate the value of the company's assets:

• real estate
• equipment and machines,
• stocks in warehouses,
• all intangible assets,
• financial investments.

Business is an investment product. Any investment in a company is made only with a long-term view of returning funds with a profit. Since quite a lot of time passes between investments and income in business, to determine the real value of a company, a specialist analyzes its activities over a long period and separately evaluates:

• past, existing and future income,
• efficiency of the entire operation of the enterprise,
• business prospects,
• competition in the market.

Once this data is obtained, the company being evaluated is compared with other similar firms. Only a comprehensive analysis helps to calculate the real value of a company.



Valuation of an enterprise or company is the process of determining the maximum probable price of a business as a product when it is sold to other owners. Moreover, any enterprise can be sold either entirely or in parts. The company, as the property of its owner, can be insured, bequeathed or used as collateral.

What are the different types of company value?

The activities of the appraiser are regulated by the federal standard “Purpose of valuation and types of value”(FSO No. 2), which defines several main types of value of any valuation object:

1. Market price.

The market value of the property being valued, for example a business, is the most likely price at which it can be sold on the day of valuation following conditions: alienation takes place on an open market with existing competition, the parties to the transaction act reasonably and have complete information about the subject of sale, and its value is not affected by any force majeure circumstances.
The market value of the company is required in the following cases:

• when the company’s property or the enterprise itself is seized for government needs;
• when the price of placed shares that the company buys by decision of the meeting of shareholders or the supervisory board is determined;
• when you need to determine the value of a company acting as collateral, for example in a mortgage;
• when the size of the non-monetary part of the company’s authorized capital is determined;
• when the owner goes through bankruptcy proceedings;
• when it is necessary to determine the amount of property received free of charge.

The market value of a company is used in all situations where tax issues, both federal and local, are resolved.
It is precisely this type of value that is always determined in purchase and sale transactions of a business or any part of it, since market value is the most objective indicator and does not depend on the wishes of the participants in the process, it corresponds to the real economic situation.

1. Investment cost– the value of a company that is related to the profitability of the enterprise for a particular investor under existing conditions.

This type of cost depends on personal investment requirements. Every investor invests his money in a business with the goal of making a profit in excess of the amount of invested capital, and not just the return of this “debt”. So the investment value of a company is calculated based on the expected income of the investor and the capitalization rate of these investments. This type of company value must be calculated when buying and selling a business, merging, or acquiring companies.

1. Liquidation value.

This cost option is calculated in a situation where the company’s work is expected to end for some reason (for example, reorganization, bankruptcy or division of the company’s property). When determining the liquidation value of a company, they find the most likely price at which the company can be sold in the shortest possible period of exposure, provided that the owner of the object of sale is forced to make a deal to alienate his property.

1. Cadastral value.

This is the market value approved and established by legislation in the field of cadastral valuation of real estate. It is this indicator that mass valuation methods should arrive at in the case of the cadastral value of an object. This type of value is calculated most often for property tax purposes.

What documents are needed to carry out an assessment of the company's value?

1. Duplicates or copies of the constituent documents of the enterprise.
2. Documents on the inventory of company property.
3. Written confirmation of the company structure and types of its economic activities.
4. For joint stock companies, duplicate reports on the issue of securities and copies of prospectuses will be required.
5. Documentation on fixed assets.
6. If there is real estate for rent, then you need to provide copies of the contracts.
7. To assess the value of a company, financial statements for 3-5 years are required - about all profits and losses of the business.
8. The final conclusion of the audit, if it was carried out at the enterprise.
9. A detailed list of all assets: tangible and intangible, in shares, bills, etc.
10. Decoding of receivables and payables.
11. If the company has subsidiaries, then it is necessary to collect information about them and provide financial documentation for them.
12. A ready-made business development plan for the next 3-5 years, containing potential gross revenue, investments, expenses and calculation of net profit in each next year.

This is a preliminary list of documents that the appraiser will need to conduct an examination of the company’s value, however, it can be shortened or supplemented at the request of the specialist.

How to find out the value of a company

Obviously, one of the most objective indicators of the performance of an existing business is its cost. It makes it possible to calculate the price at which a company can be sold on the open market in a competitive environment, or to predict the future value of the company's benefits. The question of how to assess the value of a company is a serious practical task of high importance for any entrepreneur.
To obtain an adequate assessment, first of all it is worth define the main goal cost calculation procedures. The most likely options are:

1. Determining the value of the company was required to complete certain legal actions. In this case, they turn to a licensed independent appraiser, who draws up his conclusion in the “Evaluation Report”, regulated by Federal Law No. 135.
2. You need to find out how much your business is really worth on the market; in this situation, the official “Valuation Report” will no longer be needed.

The fundamental difference when carrying out these procedures is not the quality of the appraiser’s work, but the cost of services and the form of the conclusion. In the first case, the specialist is obliged to comply with the requirements of the current legislation regulating his licensed activities, and usually these requirements significantly increase the price for the work.
In the second case, you will need to independently develop and clearly formulate a task for the appraiser, listing all the procedures you are interested in, factors of the company’s value and parts of the business that are subject to examination. So, as a result, you will receive only the information you need.
Business valuation means calculating its value as a property complex, which leads to profit for the owner.
To calculate the value of a company, you need to take into account all its assets, intangible and tangible: real estate, technical equipment, cars, inventory, financial investments. Next, past and potential income, enterprise development plans, competition and the economic environment must be calculated. At the end of the comprehensive examination, the data is compared with information about similar companies, and only after this the real value of the company is formed.
For the above calculations, it is applied three methods:

• profitable,
• expensive,
• comparative.

However, in fact, there are so many situations that they are segmented into classes, each of which requires its own approach and corresponding method.
To use the most appropriate calculation method, you need to first analyze the situation, the circumstances at the time of assessment and other conditions.
For some types of business, the valuation of the company is usually carried out based on commercial potential.
For example, in the case of the hotel business, we are dealing with guests as a source of income for the company. In a method called profitable, it is this source that will be compared with operating expenses to assess the profitability of the enterprise. This method is based on discounting the profit from renting out the company's property. Finally, after the assessment, both the cost of buildings and land are included.
The company's value is assessed using cost method, when we are talking about a business that is not subject to purchase and sale, as is the case with government agencies or clinics. This assessment takes into account the cost of constructing the building, depreciation and wear and tear of the property.
Comparative method used when there is a market for such a business. This is a market-based method of assessing value, which is based on an analysis of similar properties that have already been sold in other markets.
Hypothetically, all of the above approaches must give the same value. But in fact, market conditions are not ideal, businesses are often inefficient, and information is insufficient and imperfect.
Determining the value of a company in each of these approaches allows use of various assessment methods:

1. For the income approach it is:

• capitalization method, which is used in the case of established companies that managed to accumulate assets in previous periods;
• method of discounting cash flow for a young business that will develop in the future. Used when the company has a potentially promising product.

1. For the cost approach, the following are used:

• the net asset method - when it comes to reducing production volumes or closing a business on the initiative of the investor;
• and the company's liquidation value method.

1. For the comparative approach these are the methods:

• transactions, which is used in situations similar to the conditions for applying the net asset method;
• industry coefficients that evaluate operating enterprises that do not plan to close in the period after the examination;
• capital market. This method is also intended for “living” companies.

Please note that the last three methods are only valid if there is a similar business that matches the type of the valuation object, otherwise the analysis will not be indicative. Next, we’ll briefly talk about the use of these methods by which the value of a company is calculated.



If you require an estimate of cost for the forecast period, it will be determined discounted cash flow method. To bring potential income to current value, a discount rate is used.
In this scenario, the company’s value is calculated according to the following formula:

• P = CFt/(1 + I)^t,

Where P- price,
I- discount rate,
CFt- cash flow,
t– this is the number of the time period during which the assessment occurs.
Do not forget to take into account that in the period after the forecast, your company will continue to operate, which means that future prospects will determine a wide variety of options - from explosive growth of the enterprise to bankruptcy.
It happens that calculations are carried out using Gordon model, implying stable and systematic growth in the company’s sales and profits, as well as equal volumes of capital investments and depreciation amounts.
For this situation, the following applies: formula:

• P = СF (t + 1)/(I− g),

wherein CF(t+1) is the cash flow in the first year following the forecast period,
I- discount rate,
g– flow growth rate.
The Gordon model is most convenient to use when calculating the value of a company if the object of assessment is a large business with a large market capacity, stable supplies, production and sales, located in favorable economic conditions.
If bankruptcy of the enterprise and further sale of property is predicted, then to calculate the cost this formula is required:

• P = (1 −L av) × (A −O) −P liquid,

Where P– company value,
P liquid– costs of its liquidation (such as insurance, services of a valuation expert, taxes, employee benefits and management costs),
ABOUT– amount of liabilities,
L avg– discount provided due to the urgency of liquidation,
A– the total value of all the company’s assets after their revaluation.
The results of calculations using the current formula are also influenced by the location of the enterprise, the quality of assets, and the situation on the market as a whole.

Quickly calculate the value of a company using an express assessment

Express valuation model, which we will talk about in more detail, is based on the method of discounting cash flow for an enterprise that we already know. For convenience, we abbreviate this term as DDP method For the company. These concepts, as we remember, are used in the income approach to valuing a company.
This approach is divided into the following most common ones: assessment methods:

• method of calculating economic profit;
• DDP method;
• real options method.

According to a lot of information, both direct and indirect, the most adequate method for determining the value of a company is the DCF method. Provided that we choose to display the behavior of the stock market (for example, the capitalization of an enterprise according to its data) as a criterion for the effectiveness and expediency of the method.
Important, that The DDP method has several varieties, corresponding to different purposes and differing in techniques for calculating both the flow itself and the discount rate. We list the most popular varieties:

• DCF for the equity capital of a joint stock company (Free Cash Flow to Equity);
• discounting of DP for the company (Free Cash Flow to Firm);
• and another type of cash flow discounting - for capital (Capital Cash Flow);
• Adjusted Present Value.

At the same time, the entire DCF method for an enterprise is based on this formula:

In which the indexes i And j the serial numbers of periods (years) are indicated,
EV(Enterprise Value) – the value of the company,
D(Debt) – the cost of short-term and long-term debt,
FCFF stands for "free cash flow for the firm", excluding debt financing, remaining after taxes (or operating cash flow),
E(Equity) is the amount of the organization’s own capital,
WACC(Weighted Average Cost of Capital) is translated as “weighted average cost of capital”, which is calculated as follows:

r d– the cost of the company’s capital, which is borrowed,
t– income tax rate,
r e– the amount of equity capital.
When calculating the value of companies in Russia, it is often the following simplifications are introduced:

1. Weighted average cost of capital WACC can be denoted as a discount rate – r. This move does not destroy the adequacy of the formulas, since for business in Russia the calculation WACC is not always possible. Because of this, analysts resort to other calculation options.
2. And let's assume that the variable r is constant throughout all years. This is due to the fact that determining this indicator in Russia even for one specific year causes great problems and leads to methodological stupor. So, if we do not introduce such a simplification, then we will unreasonably complicate the entire model for express assessment of the company’s value.

As a result of all the above transformations we get the expression kind

Factors of company value within the described valuation model are any scalar quantities and vectors that affect the value of the enterprise in calculations.
Note that forecasting free cash flow for a firm for every year of an indefinite period is quite difficult and practically meaningless. This happens because the meaning of the terms with the index i too small because of the denominator, and the imperfect calculation of the numerator has almost no effect on the final result of this calculation. For this reason, the following popular practice is used an approach:

• the company's value is divided into the forecast period and the post-forecast period;
• in the first period, cost factors are forecast based on assumptions and plans for further development enterprises;
• in the post-forecast period of time, cash flows are estimated based on the hypothesis of a fixed rate of their growth throughout the entire period.

Valuing a company: common mistakes

Anyone who has encountered valuation services knows perfectly well that exactly how they calculate it significantly affects the market value of the same business being valued. The resulting amounts may vary several times. Such results often lead to serious financial damage, conflicts and even litigation.
Let's call There are several main reasons for variations in the value of the property being assessed:

1. Methodological errors.

Inadequate value is obtained as a result of calculation errors, as well as methodological inconsistencies in assessing the value of the company. Carefully study the experience and professional level of the appraiser.

1. Intentional misrepresentation of value.

Unfortunately, to this day, a certain share of the market for assessment services for various objects is occupied by “custom” examinations. That is, the real cost can be underestimated or overestimated in the expert’s opinion at the request of the customer.

1. Subjective opinion of an expert.

Although the assessment procedure is based on specific values ​​and economically sound assumptions, the process remains largely subjective. So the outcome may depend on the appraiser’s personal view of the future of the market, financial capabilities and other factors of the company’s value. The decision on how to treat economic conditions must be made by the expert conducting the analysis. And he will not always be able to predict even the most seemingly predictable things. Judge for yourself: who could have predicted the development of the oil market at 66 dollars per barrel two or three years ago, and not at 25 or even the optimistic 30 dollars per unit?

1. Wrong statement of the problem.

The size of the final cost, which will be obtained as a result of complex analysis and calculations, largely depends on the correct formulation of the problem, on the accuracy and adequacy of the choice of the type of cost, and on the final goals for which the entire procedure is carried out. No wonder it's the same security can be estimated in amounts that differ by 20 or even 50%. This is influenced, for example, by whether it is a minority or majority-owned company. Depending on the purpose of determining the value of the company, the calculation process is carried out differently.

1. Distortion of official reports.

The management of some enterprises deliberately makes a discrepancy between real and official reporting. And distortion of this factor of the company’s value inevitably leads to incorrect assessment results. This problem is even more aggravated in the case when it is necessary to make payments for a business whose share is pledged when receiving loan funds. Banks prefer to work not with management reporting, but only with official ones, which significantly changes the assessment indicators.

1. Legislative shortcomings.

Nowadays, experts in the field of valuation turn to three main methods of this procedure - cost, income and comparative. Official valuation standards state that the final calculation must take into account the results obtained in all three approaches. But these methods do not always correspond to the objectives of the examination.
List of factors to pay attention to, in order to clarify their meaning and receive comments from an expert assessing the value of the company:

1. The cash flow forecast made based on the results of the analysis and the discount rate reflecting the costs of attracting third-party capital – with the income approach.
2. The cost of all intangible assets (including those that are not included in this category according to the legislation of the Russian Federation) – with a cost approach.
3. The adequacy of multipliers (price coefficients) and the comparability of the analogue company with which the comparison is being made – with a comparative approach.

What methods (methods) are used to assess the value of a business? How is a business valuation carried out using an example and what goals are pursued? What documents are needed to evaluate the business of an enterprise?

Hello everyone who visited our resource! Denis Kuderin is in touch, an expert and one of the authors of the popular HeatherBeaver magazine.

In today's publication we will talk about what a business valuation is and why it is needed. The material will be of interest to current and future entrepreneurs, directors and managers of commercial companies and all those who are close to business and financial topics.

Those who read the article to the end will receive a guaranteed bonus - a review of the best Russian companies specializing in business valuation, plus advice on choosing a reliable and competent appraiser.

1. What is a business valuation and when might it be needed?

Any business - be it a manufacturing enterprise plastic cups or the automotive complex – strives to develop and expand its sphere of influence. However, it is impossible to correctly assess your prospects without a comprehensive analysis of the current state of affairs.

It is business assessment that gives owners and managers of existing commercial enterprises a real picture of the company’s assets and its potential.

In what cases does a business need an assessment:

• sale of the entire enterprise or its shares in the form of shares;
• rental of an existing business;
• development of new investment directions for the purpose of expansion and development of the company;
• revaluation of funds;
• reorganization of the company - merger, separation of individual objects into independent structures;
• liquidation of the company as a result of bankruptcy or termination of operations;
• issue or sale of shares;
• optimization of production and economic activities;
• changing the company format;
• change of leadership;
• transfer of assets as collateral;
• transfer of enterprise shares to the authorized capital of a large holding company;
• company insurance.

As you can see, there are many situations in which a business needs a professional assessment. But the main objective There is always only one such procedure - a competent analysis of the financial efficiency of the enterprise as a means of making a profit.

When initiating business assessment activities, interested parties want to know what kind of income a specific commercial structure is generating or will generate in the future. Sometimes the assessment task is even more specific - to answer the questions: develop or sell the company, liquidate it or try to reorganize it, should we attract new investors?

The value of a business is an indicator of its success and efficiency. The market price of a company consists of its assets and liabilities, the value of personnel, competitive advantages, and profitability indicators for the entire period of existence or a specific time period.

Small business owners and individual entrepreneurs may have a question: is it possible to evaluate a company independently? Alas, the answer is no. Business is a complex and multifaceted category. You can get a rough estimate, but it is unlikely to be objective.

And one more important nuance - independently obtained data does not have official status. They cannot be considered as full-fledged arguments and will not be accepted, for example, in court or as a .

2. What goals are pursued by business valuation - 5 main goals

So, let's look at the main tasks that are solved during the business valuation procedure.

Goal 1. Improving the efficiency of enterprise management

Effective and competent enterprise management is an indispensable condition for success. The financial status of the company is characterized by indicators of stability, profitability and sustainability.

This assessment is mainly needed for internal use. The procedure identifies excess assets that are slowing down production and undervalued industries that can generate profits in the future. It is clear that we need to get rid of the former, and develop the latter.

Example

During a business assessment in a trading company, it turned out that the use of rented warehouses for storing products is 20-25% cheaper than maintaining and maintaining their own premises on the balance sheet.

The company decides to sell its warehouses and henceforth use only rented space. There are cost savings and optimization of production processes.

Goal 2. Buying and selling shares on the stock market

The company's management decides to sell its shares on the stock market. To make an economically feasible decision, you need to evaluate the property and correctly calculate the share that is invested in securities.

Selling shares is the main way to sell a business. The company can be sold entirely or in parts. Obviously, the value of a controlling stake will always be higher than the price of individual shares.

At the same time, valuation is important for both share owners and buyers. It is also desirable that the appraiser not only name the market price of the package, but also analyze the prospects for the development of the business as a whole.

Goal 3. Making an investment decision

Such an assessment is carried out at the request of a specific investor who wishes to invest his funds in an operating enterprise. Investment value is the potential ability of an investment to generate income.

The appraiser determines the most objective market value of the project from an investment perspective. Take into account, for example, the prospects for the development of the industry in a particular region, the direction of financial flows into this area, and the general economic situation in the country.

More information is in the article “”.

Goal 4. Enterprise restructuring

The main goal of an owner ordering an assessment during a company restructuring is to select the most optimal approach to the processes of changing the structure of the company.

Restructuring is usually carried out with the aim of improving business efficiency. There are several types of restructuring - merger, accession, separation of independent elements. The assessment helps to carry out these procedures with minimal financial costs.

In case of complete liquidation of an object, an assessment is needed mainly for making decisions on the return of debts and the sale of property at free auction.

During the restructuring process, it is often necessary to carry out a complete review of the company's current assets and liabilities.

Goal 5. Development of an enterprise development plan

Developing a development strategy is impossible without assessing the current status of the company. Knowing the real value of assets, the level of profitability and the current balance, you will rely on objective information when drawing up a business plan.

In the table, the assessment goals and features are presented in visual form:

№	Objectives of the assessment	Peculiarities
1	Improving management efficiency	Results are for internal use
2	Purchase and sale of shares	Valuation is important for both sellers and buyers
3	Making an investment decision	The object is assessed from the point of view of investment attractiveness
4	Business restructuring	Evaluation allows you to change the structure taking into account maximum efficiency
5	Development of a development plan	Assessment allows you to draw up a competent business plan

Method 3. Assessment based on industry peers

Here we use data on the purchase or sale of enterprises that are similar in profile and production volume. The method is logical and understandable, but you need to take into account the specifics of the company being evaluated and specific economic realities.

The main advantage of this method is that the appraiser focuses on factual data, not abstractions, and takes into account the objective situation on the sales market.

There are also disadvantages - the comparative approach does not always affect the prospects for business development and uses average indicators of industry peers.

Method 4. Valuation based on cash flow forecast

The assessment is carried out taking into account the long-term prospects of the company. Specialists need to find out what kind of profit a particular business will bring in the future, whether investments in the enterprise are profitable, when the investments will pay off, in what directions the funds will move.

4. How to estimate the value of an enterprise’s business - step-by-step instructions for beginners

So, we have already found out that only professionals can correctly evaluate a business. Now let's look at the specific steps business owners need to take.

Step 1. Choosing an appraisal company

Selecting an appraiser is a responsible and important stage of the procedure. The final result depends entirely on it.

Professionals are distinguished by the following characteristics:

• solid experience in the market;
• use of current technologies and techniques, modern software;
• availability of a functional and convenient Internet resource;
• a list of well-known partners who have already used the company’s services.

The specialists themselves who will conduct the assessment must have permits and insurance for their professional liability.

Step 2. We provide the necessary documentation

The appraisal firm will, of course, explain to you in detail what documents are required to be provided, but if you collect the package in advance, this will save time and immediately put the appraiser on a business wave.

Clients will need:

• title documents of the company;
• charter of the enterprise;
• registration certificate;
• list of real estate, property, securities;
• accounting and tax reports;
• list of subsidiaries, if any;
• certificates of debt on loans (if there are debts).

The package is supplemented depending on the goals and features of the procedure.

Step 3. We agree on a business valuation model with the contractor

Usually the customer knows for what purpose he is conducting the assessment, but is not always aware of which methodology is best to use. During the preliminary conversation, the expert and the client jointly develop an action plan, determine assessment methods and agree on the timing of its implementation.

Step 4. We are waiting for the results of industry market research by experts

To begin with, appraisers need to analyze the situation in the industry segment of the market, find out current prices, trends and prospects for the development of the area under study.

Step 5. We monitor business risk analysis

Risk analysis is a necessary stage of business assessment. The information obtained during such analysis is necessarily used in drawing up the report.

Step 6. We control the determination of the development potential of the enterprise

Professional appraisers always take into account the prospects for business development, but it is advisable for clients to control this stage of the study and be aware of the results obtained. It is always useful to know what potential your business has.

Step 7 We receive a report on the work done

The final stage of the procedure is the preparation of the final report. The finished document is broken down into individual items and contains not only bare numbers, but also analytical conclusions. The report, certified by signatures and seals, has official force in resolving property disputes and in court proceedings.

How to conduct an assessment as competently and safely as possible for your company? Best option– engage independent lawyers as consultants at all stages. You can do this by using the services of the Pravoved website. The specialists of this portal work remotely and are available around the clock.

Most of the consultations on the site are free. However, if you need more in-depth assistance, the services are paid, but the amount of the fee is set by the customer himself.

5. Professional assistance in business valuation – review of TOP-3 valuation companies

Don’t have the time, desire or opportunity to look for an appraiser yourself? No problem - take advantage of our expert review. The three best Russian appraisers include the most reliable, competent and proven companies. Read, compare, choose.

It doesn’t matter for what purpose you are conducting an assessment - purchase and sale, secured lending, improvement of management, reorganization - KSP Group specialists will carry out the procedure professionally, promptly and in accordance with all the rules.

The company has been operating in the market for more than 20 years, has about 1,000 regular customers, is well versed in the realities of Russian business, and provides free consultations to customers. Among the firm's regular partners are well-known companies and small and medium-sized businesses.

The organization has membership in the Self-Regulatory Organization ROO ( Russian society appraisers) and liability insurance for 5 million rubles.

The year the company was founded is 2002. The company guarantees prompt work (business assessment period is 5 days) and offers reasonable prices (40,000 for a standard assessment procedure). In its methods, the organization adheres to the principles of “Ethical Business” - transparency, honesty, openness, compliance with contract terms, responsibility.

Yurdis has 20 professional appraisers on its staff, members of the largest Russian SROs. Each of the specialists has liability insurance in the amount of 10 million rubles, diplomas and certificates confirming their high qualifications. Among the company's well-known clients are Gazprombank, Sberbank, Svyazbank, and the Military Mortgage Organization Center.

3) Atlant Score

The company has been doing business in the appraisal market since 2001. Works with tangible and intangible assets, develops and forecasts ideal schemes for increasing income, cooperates with enterprises in all regions of the Russian Federation.

The list of advantages includes exemplary accuracy of assessments, competent legal preparation of reports, and a clear understanding of the goals and objectives of customers. The company is accredited by commercial and state banks of the Russian Federation, uses an expanded methodological base in its work, and applies its own technological and scientific developments.

And a few more tips on choosing the right appraiser.

Reputable companies have a well-designed and flawlessly functioning website. Through the Internet resource of such companies, you can get free consultations, order services, talk with managers and support representatives.

Conversely, fly-by-night companies may not have a network portal at all, or it may be designed as a cheap one-page website. No additional information, analysis articles, interactive features.

Tip 2. Refuse to cooperate with wide-profile companies

Organizations positioning themselves as universal firms do not always have the appropriate level of competence.