ShineWing TY Teoh logoShineWing TY Teoh logoShineWing TY Teoh logoShineWing TY Teoh logo
Menu
  • Home
  • About
      • ShineWing TY TEOH
      • ShineWing International
      • Praxity
      • Founder's Message
    • ShineWing TY TEOH

      ShineWing International

      Praxity

    • Founder's Message
    • Praxity
    • ShineWing International
    • ShineWing TY TEOH
  • Services
    • Audit & Assurance
    • BPO & Business Advisory
    • China Desk
    • Digital Transformation & Data Analytic
    • Family Office & Private Client Services
    • Financial & Transaction Advisory
    • Market Entry Advisory
    • Migration Advisory
    • Myanmar Desk
    • Offshore Advisory
    • Profit Improvement
    • Risk & Governance Advisory
    • Singapore Desk
    • Sustainability Advisory
    • Tax Advisory
    • Transfer Pricing Advisory
    • Valuation Advisory
      • Audit & Assurance
      • BPO & Business Advisory
      • China Desk
      • Digital Transformation & Data Analytic
      • Family Office & Private Client Services
      • Financial & Transaction Advisory
      • Market Entry Advisory
      • Migration Advisory
      • Myanmar Desk
      • Offshore Advisory
      • Risk & Governance Advisory
      • Singapore Desk
      • Sustainability Advisory
      • Tax Advisory
      • Transfer Pricing Advisory
      • Valuation Advisory
    • Audit & Assurance

      BPO & Business Advisory

      China Desk

      Digital Transformation

      Digital Transformation & Data Analytic

      Family Office & Private Client

      Family Office & Private Client Services

      Financial & Transaction Advisory

      Financial & Transaction Advisory

      Market Entry Advisory

      Market Entry Advisory

      Migration Advisory

      Migration Advisory

      Myanmar Advisory

      Myanmar Desk

      Offshore Advisory

      Offshore Advisory

      Risk & Governance Advisory

      Risk & Governance Advisory

      Singapore Desk

      Singapore Desk

      Tax Advisory

      Tax Advisory

      Transfer Pricing Advisory

      Transfer Pricing Advisory

      Valuation Advisory

  • Ideas & Insights
  • Careers
    • Join Us
    • Learning & Development
    • Exchange Programme
      • Join Us
      • Learning & Development
      • Exchange Programme
    • Join Us

      Learning & Development

      Exchange Programme

  • Contact
    • Enquiry Us
    • Malaysia Offices
    • Offices Location
      • Enquiry Us
      • Malaysia
      • Offices Location
    • Enquiry Us

      Malaysia

      Offices Location

CLOSE
  • Home
  • About
    • ShineWing TY TEOH
    • ShineWing International
    • Praxity
    • Founder’s Message
  • Services
    • Audit & Assurance
    • BPO & Business Advisory
    • China Desk
    • Digital Transformation & Data Analytic
    • Family Office & Private Client Services
    • Financial & Transaction Advisory
    • Market Entry Advisory
    • Migration Advisory
    • Myanmar Desk
    • Offshore Advisory
    • Profit Improvement
    • Risk & Governance Advisory
    • Singapore Desk
    • Sustainability Advisory
    • Tax Advisory
    • Transfer Pricing Advisory
    • Valuation Advisory
  • Ideas & Insights
  • Careers
    • Join Us
    • Learning & Development
    • Exchange Programme
  • Contact
    • Enquiry Us
    • Malaysia Offices
    • Offices Location
  • Home
  • Blog
  • How to Determine the Value of a Business?
PRESSROOM   I   LOG IN

How to Determine the Value of a Business?

The value of a business is determined via the process of business valuation. Business valuation is important for organizations because selling and buying businesses is a standard part of the corporate sector and large-scale businesses often have to rely on accounting services to conduct an advance business valuation. Before diving into the particular method of determining the value of your business, it is important to be familiar with some of the following basics:

 

What is Business Valuation?

When techniques and resources are employed to evaluate the worth of a business it is called business valuation. This service is used by both sellers and buyers. Sellers use business valuation to set a suitable price for their business, and buyers use it to decide whether to buy a business. Organizations and different types of businesses make use of the accounting services available in Malaysia for business valuation to either sell or buy a business in a profitable way.

A business valuation includes the determination and use of the latest trends and values of the market to set an appropriate value of the business. It is a complex process that involves thorough research of the market, competitive research and an analysis of a business’s financial conditions.

 

Valuation Calculation

Small-scale businesses make use of the fundamental business valuation to determine the value of their company. A basic valuation can be performed by the internal team of a small company, or even yourself. Large-scale businesses and enterprises, however, have to rely on the accounting services offered by various accounting firms in Malaysia. There are many different and changing variables in the advance business valuation.

Determine the Value of a Business

 

Requirements for Business Valuation

The following are the documents that are essential for business valuations:

  • Financial statements that contain the details of financial dealings and overall information about the business’s financial history
  • Copies of tax returns
  • Legal agreements, licenses, patents and other documents related to the business
  • The latest full balance sheet of the business

If you have hired an accounting firm, you should provide them with as much information about your business as you can because it will result in an accurate and successful business valuation.

 

Three Business Values

The total value of a business is the culmination of three different values. These are:

 

1. Book Value

The book value or the liquidation value is the most straightforward part of the total business value. It is similar to your net worth which means the total value of your business recorded on the books. You can obtain the book value after eliminating all of the liabilities from your business assets.

 

2. Present Value

Present value is determined using the current and anticipated cash flows, which indicates your business’s cost both in current and future times. A steady company that has a stable stream of earning has the best chance of getting an accurate present value.

 

3. Fair Market Value

This is the estimated price of your business according to the situation of the market at the time of valuation. As a seller, fair market value is the most important value for you because you use it to set a cost on your business while meeting the potential buyers.

 

Business Valuation Formula

There are different mathematical as well as conceptual formulas involved in determining the value of a business. You can start the business valuation process using various different steps as all of the following tools will give you a good estimate value of your business, and you can use the acquired number during negotiations.

city arial view

 

A) Asset Valuation

Asset valuation includes valuing all of the assets that your business owns and showing them on a well-maintained balance sheet. Assets, for example, land, building, cars, cash, equipment and intellectual properties all have values which should be included.

 

B) Cash Flow

The majority of buyers are interested in learning about the earnings of your business and how much revenue it can generate. It is possible via a cash flow statement, which gives all of the details about cash coming in and out of business.

 

C) Seller’s Discretionary Earnings (SDE)

SDE is the most common approach of business valuation implemented by accounting firms all over the world, including Malaysia. Its purpose is to find out the amount of money a business brings to its owner. The following formula can calculate it:

SDE = (Total Non-Taxed Earnings + Personal Salary + Non-essential Expenditures) – Liabilities

 

In a Nutshell

Business valuation is an essential step in selling or buying a business. Due to the rapidly changing economic conditions of a particular market or country’s economy, it can be quite difficult for firms to evaluate their worth accurately. Therefore, you can use the accounting services present in Malaysia to determine an accurate value of your business and conduct effective negotiations. For more information, feel free to get in touch with us.

Share
0
ABOUT

ShineWing TY TEOH
ShineWing International
Praxity
Founder's Message

SERVICES

Audit & Assurance
BPO & Business Advisory
China Desk
Financial & Transaction Advisory
Migration Advisory
Myanmar Advisory
Offshore Advisory
Profit Improvement
Risk & Governance Advisory
Sustainability Advisory
Tax Advisory
Transfer Pricing Advisory
Valuation Advisory

IDEAS & NSIGHTS
CAREERS

Join Us
Learning & Development
Exchange Programme

CONTACT

Enquiry Us
Malaysia Offices
Offices Location

PRESSROOM
OUR GLOBAL PRESENCE

1

100+

630+

42000+

Network

Countries

Locations

Professionals

© 2021 ShineWing TY TEOH. All Rights Reserved.

ShineWing TY TEOH ("SWTYT") is a member firm of ShineWing International ("SWI") and Praxity. Each member firm of SWI and Praxity is a separate and independent legal entity. SWTYT and its affiliates are not responsible or liable for any acts or omissions of SWI and Praxity or any other member of SWI and Praxity and specifically disclaim any and all responsibility or liability for acts or omissions of SWI and Praxity or any other SWI member.

SWI is a Top 20 global network of independent accounting and consulting firms by International Accounting Bulletin ("IAB"). Praxity is the world’s largest alliance of independent accounting firms by International Accounting Bulletin ("IAB").

Legal   |   Privacy   |   Blog