For family businesses, valuation isn’t just a technical exercise. It’s personal. Understanding what your business is worth—and why—is critical to deciding on a potential acquisition, or preparing for succession, or even navigating shareholder conversations.
But before you dive into the formulas, it’s worth taking a step back to consider six principles that shape valuation.
One principle is to not get caught up in your business’s past performance. Valuation isn’t about where a company’s been—it’s about where it’s going. This is the Principle of Expectations.
Your business’s value today depends on tomorrow’s cash flows. This means that family business directors must shift their mindset from past results to future potential. Yes, an analysis of the past can help you set reasonable expectations for the future. However, investors care more about what will happen in the next quarter and beyond.
There are five more principles that shape family business valuation. Read about them in this article.
Read about the six principles that shape family business valuation here.
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