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Determining the value of a business

On Behalf of | Feb 7, 2020 | Business Law

When a locality or higher government in the state of Texas announces that it wants your business property for a road project, you have the right to seek fair compensation for your land and not accept an offer you feel is inadequate. So if you see the storm clouds of eminent domain approach your commercial property, making sure your business receives a proper valuation is important.

Forbes explains that people determine business value in many ways. Factors specific to your company will greatly influence the proper way to valuate it. For instance, the industry you work in will help determine how to valuate your company. This is because industries place value on their companies in different ways. To take one example, the value of businesses in some industries is determined by more than just their share of profits or sales.

People use different methods to arrive at a business value. A discounted cash flow method (DCF) forecasts the positive cash flow that a company will generate, taking into account possible changes in the worth of the dollar. The DCF uses this information to generate the intrinsic value of a company. Business owners often utilize a DCF because it creates a strong reference point for their companies.

Business owners can employ other methods to value a business. Some owners employ the asset-based approach, finding value by examining the value of the assets owned by the business. Such assets may include the business building and property it sits on, the inventory, the amount of cash the business has on hand, the vehicles used by the company, and the company list of customers or clients.

Accounting for the full value of your business is crucial because losing your land can also affect the other values of your business and cause loss to you. A business thrives because of many factors other than the land it sits on. If eminent domain damages the value of your business in other ways, you might seek compensation for those losses as part of the just compensation the government offers you.

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