In the most simple terms, the cash flow or return on investment business valuator method is one of the most easy to understand company valuation methods around. Essentially, it determines what the business owner gets out of the business each year and how many years it takes to recover the investment. For example, if you purchased a business for $100,000 and received $25,000 each year, our business valuation software will determine that it takes approximately four years to break-even. There are of course, more than just these initial factors involved in the business valuation software determining an accurate company valuation.
This is one of the most common company valuation methods of business appraisal used, because the return on investment is very important as it is the most straightforward financial valuation concept to understand. For any business owner, or future business owner, the return on investment can potentially fund their freedom.
However, when a business is losing money, or paying the owners less than fair market compensation, there is no return on investment for our business valuation software to calculate. In this instance, if our business valuator has determined there is no return on investment, it would be wise to contact a business broker, or a professional business valuator to get an appraisal of assets based on other company valuation methods, such as the Tangible Assets Method.