Valuation of an Existing Business
The principal advantage of buying an existing business, rather than starting one from scratch, is that you face less risk when you take over a firm that is already up and running. However, there are risks in buying an existing business as well, such as paying way above the value of the existing business. Calculating the valuation of an existing small business is challenging, because you cannot simply look up its stock price to calculate its market capitalization. It is almost impossible to know exactly what the small business is actually worth (Katz & Green, 2014). Katz and Green (2014) and Sim and Wilhelm (2010) discussed the advantages and disadvantages of several different small business valuation methods. Review this week's resources and other credible resources from the Walden Library and Google Scholar to learn more about valuation methods for small business.
- Identify and explain at least two methods for calculating the valuation of an existing business.
- Compare and contrast the valuation methods you identified and discuss the advantages and disadvantages of using each method.
- State your rationale and justify your rationale with examples and credible references.
Please use citation and references