Business Market Value

Definition

Current estimate of the business selling price. Usually determined by business valuation methods under the market approach.

What It Means

One of the main reasons to do business valuation is to estimate the business selling price.

If you are a business owner, you would be interested to know what price your business can sell for. If you are looking to buy a business, the selling prices of similar businesses give you an idea of what you would need to spend to acquire a business.

In either case, the business market value is the current indication of the potential business selling price.

You can use market-based business valuation methods to get a current estimate of the business market value. These business valuation methods work because they rely on direct comparisons to selling prices of businesses that resemble your business or your acquisition target.

Business market value does not need to be fair

Note that the business market value is not necessarily the same as its fair market value, a formal standard of value used in business valuation.

For example, assume that you intend to sell your business to a group of strategic business buyers. These buyers may be looking to reap specific benefits through acquisition, applying the so-called investment standard of business value.

The result is that your business market value, or the price you are likely to sell your business for, exceeds its fair market value.

Conversely, a motivated seller may be unwilling to wait long enough to get good offers from business buyers. This lack of market exposure can lead to the business market value falling below its fair market value.

Note, however, that when used as a basis of value, market value is essentially identical to the fair market value definition.