Business value is primarily made up of the goodwill in the business, business value is also made up with the plant and equipment in the business and business value is also made up with the stock in trade of the business.
Other components of business value include intellectual property, such as patents, trademarks, brands, formulae and recipes!
Business value is a cocktail of all these ingredients and it is these ingredients which make the profit on which the business value is based. The profit of the business is usually "multiplied" by an accepted multiple for the industry and based on comparable sales evidence of similar type and sized businesses which have recently sold in the same marketplace.
But business value is not just that simple...the business value can also be affected by individual strengths and weaknesses associated with the particular business and also macro economic forces such as government policy changes or the Global financial crisis.
Examples of how business value can be affected just look at what has happened to the value of insulation businesses in 2009 and 2010. In 2008 business value of insulation businesses was skyrocketing but in 2010 it was plummeting...all because of outside influences on a previously stable industry business value sector!
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