Performing a reliable valuation requires specialist knowledge. A business valuation determines the value of a company and is mainly performed in relation to the purchase and sale of businesses.
The importance of a proper valuation
There are several ways to determine the value of companies. However, not every method is equally accurate. The consequence of an improper valuation is that the businesses are either valued too low or too high. A low valuation means the business runs the risk of making less profit or even losing money in a sale. A valuation which is too high on the other hand could lead to potential buyers breaking off negotiations.
Discounted Cash Flow (DCF)
At Lengkeek, we use the discounted cash flow method (DCF). This method is based on the assumption that the value of a business is determined by future free cash flows. This approach requires thorough knowledge of the company and the circumstances in which it operates.