A number of business valuation models can be constructed that utilize various methods under the broad business valuation approaches. Most treatises and court decisions encourage the valuer to consider more than one method, which must be reconciled with each other to arrive at a value conclusion. Understanding of the internal resources and intellectual capital of the business being valued is as important as the economic, industrial and social environment.

The choice of the appropriate valuation approach (or approaches) to be used in a given valuation project is based on the judgment of the valuer. The valuer’s choice of methods is determined by the characteristics of the business to be valued, the purpose and use of the valuation and its report, the pattern of historical performance and earnings of the subject company, the company’s competitive market position,  experience and quality of management, the availability of reliable information requisite to the various valuation methods, the marketability of equity ownership interest to be valued, and others. These factors are summarized below:

• History and nature of the business
• Industry and general economic outlook
• Book value and financial condition
• Earning capacity
• Dividend-paying capacity
• Prior sales and size of the block of stock; and
• Comparisons to similar publicly traded
  guideline companies.

There are broadly three approaches of valuation:

• Asset Approach
• Income Approach
• Market Approach