Net Asset Value Method: When to Use it in Business Valuations

Consider using the Net Asset Value Method for valuing a business when:

  1. The company holds significant tangible assets, and there are no significant intangible assets.
  2. There is little or no value added 10 the company’s products or services from labor.
  3. The balance sheet reflects all the company’s tangible assets; that Is, the company has not expensed any tangible assets that continue to benefit the company.
  4. The company is expected to continue as a going concern.·
  5. The ownership Interest being valued is either a controlling interest or has the ability to cause the sale of the company’s assets.·
  6. The company has no established earnings history or a volatile earnings/cash now history.
  7. A significant portion of the company’s assets are composed of liquid assets or other investments (such as marketable securities, real estate investments, mineral rights).
  8. The business depends heavily on competitive contract bids, and there is no consistent, predictable customer base.
  9. It is relatively easy to enter the company’s industry (for example, small machine shops and retail shops).
  10. The company is a start-up business.
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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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