ABSTRACT
This chapter provides a brief synopsis of valuation, so that an entrepreneur can economically and rapidly determine which offers are unreasonable and which are worthy of further consideration. Business valuation can be called an art because a certain amount of judgment must be used in conjunction with the mathematical principles. The ability to estimate the valuation of a business is a crucial skill needed by entrepreneurs to make decisions as to whether or not to sell or otherwise harvest wealth from their business enterprise that he has created. The basic principles of valuation are fair market value, going-concern value, highest and best use, future benefits, substitutes and alternatives, discounted cash flow analysis, and objectivity. The technique of discounted cash flow analysis is the most detailed and most consistent with all the principles of valuation. The market comparison approach attempts to follow the principles of valuation but its simplistic nature causes it to frequently fail.
