Different valuation techniques

Perspective buyers may value a company using different techniques, such as a calculation of future earnings or a multiple of trailing 12-month earnings. Each technique has its advantages and disadvantages. Finite numbers provide a better understanding of the transaction, but may not consider recent positive performance. Formulaic approaches introduce more unknowns and can complicate negotiations. For example, adjustments made to earnings for non-business expenses may differ between the buyer and seller, resulting in significant gaps in the final valuation.