Expected Return as a by-Product of Business Valuation Report

Many believe that company valuation is only suitable for finding the company's value. They are sure that the value of a company should be estimated when someone wants to buy a company, sell a company, or divorce. 98% of Equitest customers purchased a subscription to the site for this very reason.
Why did the remaining 2% still purchase a subscription to the site when they were not interested in selling a company they own today or in the future? Not because they are startup owners looking to raise capital from investors but because they are investors are looking to purchase a new business.
So why exactly do they need to know what a valuation report is?

The reason is straightforward. An entrepreneur who starts a new business often starts the business without assessing the return he is expected to earn. He invests $100,000. He probably needs to estimate how much he will make on the investment - is it $1,000 a year, $10,000, or $250,000?
If he is expected to earn only $1,000 on the investment, his return is 1% (100,000 / 1,000). In this case, should he start the business?
If, on the other hand, he is expected to earn $250,000 on the investment, his return will be 250% (100,000 / 250,000). In this case, the establishment of the business will be worthwhile.
The problem is that most entrepreneurs don't think about the rate of return they are expected to earn - either because they need to know it's possible or they need to learn how to do it.

But the truth was that to evaluate a company's value, several very orderly steps must be performed. One of the steps is to estimate the rate of return the shareholders are expected to earn.
The rate of return shareholders are expected to earn can be calculated using financial models that have become standard practice. The CAPM (Capital Asset Pricing Model), the SML (security market line) model, and the Modigliani-Miller theorem (M&M) model - are all financial models aimed at supplying the expected return.
These models describe in a mathematical way what is expected to be the return the investor will earn in the future on his investment.

Equitest implements these models as an integral part of the valuation reports.
That is - the fact that we know what the business is worth - will also allow us to conclude, indirectly, several additional answers - is it worth setting up the venture? Is it to continue owning the business, or maybe it's worth starting another business? And it's all about the rate of return demanded by the shareholders.

If you are looking for a quick and reliable way to test the value of a company - you are welcome to use Equitest - an AI Business Valuation Software. Start for Free by clicking here.