Business Valuation

Business, Legal & Accounting Glossary

Definition: Business Valuation

Business Valuation

Full Definition of Business Valuation

Business Valuation is the process of determining the economic value of a business or company. Business valuation can be used to determine the fair value of a business for a variety of reasons,  including sale value, establishing partner ownership and divorce proceedings.

There are a variety of business valuation techniques used for determining a fair price for a business.  These include:

  • Asset-based approaches – this technique values the business based on asset minus liability estimation.  This can be done with the business as a going concern where the balance sheet is used for the basis of estimate, or a liquidation approach which estimates the net cash proceeds from liquidating the business.
  • Earning value approaches – this technique involves estimating expected cash flow from past earnings records, then multiplying the cash flow by a capitalization factor.  The capitalization factor reflects what rate of return would be expected by a reasonable purchaser.
  • Discounted future earnings – this technique involves the use of predicted future earnings (rather than past earnings) divided by a capitalization factor.

There is a truism in the venture capital industry that “the value of a company is only what someone is willing to pay for it.” In other words, in the end, the market – and your ability to attract investors and negotiate with them – will determine the value or selling price.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Business Valuation. Payroll & Accounting Heaven Ltd.
January 18, 2022
Chicago Manual of Style (CMS):
Business Valuation. Payroll & Accounting Heaven Ltd. (accessed: January 18, 2022).
American Psychological Association (APA):
Business Valuation. Retrieved January 18, 2022
, from website:

Definition Sources

Definitions for Business Valuation are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd March, 2020 | 2 Views.