VALUATION

METHODOLOGY
INCOME APPROACH
This approach is based
on the idea that the
value of a company is
directly related to its
ability to generate
income.
DCF
DCF estimates the intrinsic value based on the present value of the
expected cash flows, discounted at an appropriate discount rate that
WHEN TO APPLY
reflects the riskiness of those cash flows.
For any company whose future
Cap of earnings income/cash flow can be
Method of determining the value of an company by calculating the projected with some level of
worth of its anticipated profits based on current earnings and expected certainty. Applied for growing
future performance
companies with stabile sales and
business model. Also used to
Excees earning method
reflect both long term potential
Business valuation approach used to estimate the value of intangible
assets, particularly goodwill.
and business risks.

Precedent transactions
Looking at the prices paid in past transactions for companies that are
similar to the one being valued. WHEN TO APPLY
MARKET APPROACH This approach is most applicable
Comparables company
This approach assumes when there are comparable
Valuing a company by examining the valuations of similar companies in
that the value of a transactions or market prices
the same industry or sector.
available adn when valuator want
company is closely
to reflect the current sentiment of
related to the prices of Market price method the market. Also, good for
comparable companies Method assesses the value of an asset or liability based on its market companies that might not have
in the market. price or the current price it would fetch in the open market. positive cash flows

Net book value

NBV of an asset is the difference between its historical cost and its
accumulated depreciation. Used in accounting to reflect the asset's current WHEN TO APPLY
value on the company's balance sheet.

COST APPROACH Replacment costs Mostly for companies in

financial difficulties and
Refers to the cost of replacing an asset or an item at its current market companies with significant
This approach is based value.
amount of assets, but without
on the principle that
profit generating power or very
the value of a company low / negative renturn on
is equal to the sum of investments.
its assets. EXAMPLES

Type of business Maturity Assets Cash flow predictability Comparable data Method to consider

MRR model, stabile growth,

SaaS startup Scale up Intangible assets Not available DCF
expected churn etc..

Not reliable, this is pre- Berkus method, or

Tech startup Early stage No significant assets Not available
revenue stage replacement cost

Plant and equipment, Stabile revenues with stabile There is comparable Comparable
Manufacture Mature, public
brands growth rate companies data companies or DCF

Plant and equipment, Financial difficulties, losses, No comparable Net book value
Manufacture Mature, public
brands no significant revenues data method

Plant and equipment, Stabile revenues and cash Precedent Precedent

Wholesaler Mature
brands flows transactions transactions

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