Why You Likely Don’t Want Your Company to Be Valued on its Assets

True to its name, the asset valuation method values the assets of the business. Subtracting the liabilities of the business from the value of the assets generates the net asset value of the business.

How do you calculate the value of the assets? Well, let’s suppose you had to sell each asset. A buyer will likely pay you fair market value (what a willing buyer will pay…) for the assets. So, you research what you could reasonably expect in selling your company’s assets, total those up, and you have your gross asset value. Subtract your liabilities and this is what you could reasonably expect in a sale.  Given this method accords absolutely no value to the actual business, this method generally produces the low-water mark of the value of your business.

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