Valuation: What it is and how to calculate it in a “simple” way

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Valuation is the term used for “company assessment”. It represents the perception of investors and customers regarding the business, the judgment of its position in the market and the organization’s ROI. It is a process that uses different indicators, mathematical calculations and other subjective elements.

What you will see in this article:

What does valuation mean?
What are the types of valuation?
What is valuation for?
Three Key Components to a Discounted Cash Flow Analysis
Why is it important to do a Valuation of your organization?
In which situations is it advisable to calculate valuation?
Valuation examples
What are the benefits of knowing the real value of the company?
How to calculate a company's valuation?
How to calculate valuation through FDC
Valuation is the process of assessing the value c-level contacts email list a company. Through valuation calculations, it is possible to estimate how much an organization costs or the most likely price at which it will be sold in a specific period. The result comes from market perception and the decisions made so far by the company's CEO.

Calculating valuation is a recurring question for entrepreneurs who are in the process of buying and selling businesses, as it involves a series of characteristics that are considered non-measurable , making the action complicated.

But this article has exactly the objective of explaining in detail what is behind “valuation” and how it can be identified through 4 simple steps, providing a step-by-step guide to each calculation so that you know once and for all how to define the value of your company.


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What does valuation mean?

Defining the valuation is a fundamental step in the process of selling a company , because assigning a very high value - above the market price - can result in no interest in the business.

On the other hand, if the price is lower, the entrepreneur may not maximize his profits and, consequently, lose money. Having a calculation method for this moment, even if simple, is important so that the established amount is favorable for both the buyer and the seller.