Selling or Buying a Small Business/question on business
what are the ways to value intangible asset (just need the names of technniques)? Also can things like systems / programs ie. iso program increase value of a company.
In valuing a business how can one simulate or check dozens of options to add or minus assets and how that changes valuation. For example if one add a process improvement process what impact do these have on the increase valuation. What are the different ways to go about simulating the change in value of a company via testing dozens of options.
Hello, Sam, and thank you for your inquiry on AllExperts.
To answer your questions in the best way, let me begin by saying that the value of a company, although many years ago was asset-based, has since turned to be a function of adjusted profit. In other words, if there is a machine shop with a very heavy asset value, and an adjusted profit of $500,000; and there is an IT company with virtually no tangible assets other than computer equipment, also with an adjusted profit of $500,000, the value of both is likely to be very close. This obviously puts full emphasis on performance, not assets, tangible or intangible. In fact, when an owner wants me to handle the sale of a company, I usually suggest stopping all capital investment, and concentrate on performance.
So, what really matters is the result of you adding or changing an intangible asset, with enough performance history to measure the result; not the addition or change itself. In other words, the proof is in the pudding! Simulating changes would only matter if the changes had to do with performance-based profit.
I hope this provides some clarity.