Do You Need to Perform Business Valuation After Suffering Financial Damages?

Why Valuation after Damages Is Essential

Owning a business is risky because there will always be ups and downs. However, when something goes majorly wrong, and you suffer tangible damages, it’s essential to conduct a basic business valuation. A business valuation will help you take stock of the situation and assess what you need to do next.

However, business valuations are also an essential part of any legal action that you plan to take to establish that your company suffered because of the other party you’re using. A lawsuit that goes to court can help you regain the losses you suffered and ensure that other malicious parties don’t try to take advantage of you.

Valuation Methods That Measure Damages

Here are the three main methods that are used to calculate the damages that a business suffers. Let’s take a look at how they work.

1. Loss of Profits Method: This method takes into account the short-term loss of profits because of an obstacle the company faced. Usually, this method works to highlight the projected profit a business would have had but didn’t because of an external factor.
2. The Reasonable Royalty Method: This is best utilized in cases where copyright or intellectual property rights have been infringed. If you’re suing someone for damages because of the fact that they took your patented designs or something similar, you can use an online valuation tool to determine what license fees and royalties they need to pay to make up for it.

 3. The Loss of Business Value Method: At times, the financial damages done to a business impair its existing value rather than its potential value. This means that you’d be comparing the value of your business right before the damages occurred to the current market value it has. The difference can be adjusted for risk and transformed into a sum you should be compensated for at the minimum.

How To Get Started On Your Post-Damages Valuation

At Equitest, we’re providing an intuitive firm valuation platform through which you can value your business in its current and past conditions both. The Equitest enterprise valuation services offer you a seamless valuation experience at affordable rates.

Check our online tool out here.