What is the most common measure of value in business valuation?
By far the most common measure or standard of business value in small business appraisal is the fair market value. Fair market value is thought to be decided by the market participants – business buyers and sellers. Since many business valuation experts and business people believe that the market place is the ultimate judge of what a business is worth, fair market value is the de facto standard used in most business valuations. Experienced business buyers may seek to realize strategic benefits through a business acquisition. When valuing a business for acquisition, such business buyers often apply the investment standard of business value. Unlike fair market value, the investment standard measures what the business is worth based on the business buyer’s specific objectives. You can estimate the business fair market value by comparing it to sales of similar businesses. One effective way to do so is to use ValuAdder market-derived business valuation rules of thumb.
