Business Valuation Components
Ongoing businesses or "Going Concerns", as they are officially termed, contain both tangible and intangible value including such intangible assets as: accounts receivable, branding, contracts receivable, customer deposits, customer lists, key employees, patents, recipes, special knowledge, trademarks, unique company name & reputation, and goodwill in general as well as other intangible assets in addition to the tangible value of the business’s physical assets.
Typically, business valuations include both tangible and intangible assets that require a value. Additionally, regarding Going Concerns, the value of their intangible assets (generally speaking) far outweighs the value of their tangible assets unless the business is insolvent, bordering on insolvency or is a holding company. In contrast, physical or tangible assets such as equipment, fixtures, furniture, jewelry, real estate, and other physical assets are appraised rather than valued.
When it comes to valuing businesses, there are occasions when tangible assets of the business (machinery and other equipment), may need to be appraised as part of a business valuation. Additionally, such tangible assets may need to be appraised for compliance with bank SBA regulations and for other purposes such as acquisitions, bankruptcy, divorce, partnership dissolutions, etc. when there is no intangible value or goodwill in a business or when there is no business at all.