Cash Flow Method of Company Valuation

In the most simple terms, the cash flow method of company valuation, or return on investment method of company valuation, 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, the business valuation calculator will determine that it would take you four years to break-even.  There are of course, more than just these initial factors involved in the business valuation calculator determining an accurate company valuation.

This is the most common financial valuation method of business appraisal used, because the return on investment is very important to business sellers and buyers, 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 calculator to calculate.  In this instance, if our business valuation calculator has determined there is no return on investment for your business, it would be wise to contact a business broker to get a business appraisal of the assets of the business based on the Tangible Assets Method of financial valuation.