ASSET APPROACH FOR BUSINESS VALUATIONS

ASSET APPROACH FOR BUSINESS VALUATIONS

A business valuation will utilize three (3) different approaches to analyze and reach a conclusion on the value of your business:

  • The income approach,
  • The asset approach, and
  • The market approach

This week we will discuss the “asset approach”.

In this approach, we are strictly looking at the balance sheet for the business along with an inventory of the actual physical assets of the business.

This works extremely well for a manufacturing entity that has a physical plant, machinery, and an inventory of product warehoused – the prototypical “widget” producer. We can easily figure out the value of all the assets, deduct all the liabilities, and come up with a “value” for the business accordingly.

Unfortunately, although much simpler than an income approach, the asset approach does not really work for service type of industries, like doctors or lawyers, as the physical assets do not fully incorporate the value of their services and unique or proprietary ways of bringing in and maintaining customers or even in a strictly manufacturing business, the things that they do internally in their process that differentiate them from their competition that can have a real difference as to the value of a particular company.

If you are facing the prospect of a divorce and likely valuation of your business, you need the services of an experienced divorce attorney.

If you would like to consult with one of our experienced attorneys in regards to a pending divorce and related business valuation, please call OWENS & PERKINS at480.994.8824 to schedule a free 30 minute consultation.

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