Basis of Business Value

Definition

A set of key assumptions defining how business value is to be measured.

What It Means

A basis of value in business valuation encompasses the foundational elements of business value measurement such as expected transactional environment, objectives of parties interested in business valuation and the purpose of appraisal.

Under the International Valuation Standards, the most important bases of business value are:

Business valuation results depend on the basis of value

Choosing a different basis of value may lead you to a different valuation result. For example, an investor focused on building a diversified portfolio of companies may value a business differently than an entrepreneur interested in a specific business opportunity.

Business valuation methods based on direct market comparison , such as the ValuAdder Market Comps, usually rely on the market value basis that is essentially equivalent to the fair market value standard. On the other hand, you can easily adapt the income-based valuation methods to use any basis of value.

See Also