Rough estimate In this type of business evaluation, as little work by specialists is invested in the job as possible. The main assumptions behind the valuation are however set forth clearly. Although the results can never be thorough, they can indicate the value of the business with an error margin of 25-35% from what is realistic.

Valuation. Another approach to assessing the business's value is to acquire the principal information and supporting materials that allow for a reasonable approximation. An effort is made to let estimates suffice for minor factors but a degree of precision is applied to any major factors. While recognised international procedures are followed, the valuation is also based on Icelandic premises and market traditions. Again, all of the main premises for the assessment are clearly defined. This sort of approach can give results with an error margin of 15-25% from the business's realistic value.

Precise valuation. A business may be appraised fairly exactly by obtaining detailed documentation with the goal of appraising it as accurately as possible. Following a close examination of this material, the firm is assessed on the basis of a number of distinct international, recognised methods, a process which demands considerable attention and weightings. The main assumptions behind the valuation are explained exactly. Approaching valuation in this manner can give results with an error margin of 5-15% from the business's realistic worth.

 

Attention must be called to the fact that a business valuation will always be a subjective assessment, even though it follows calculations, because calculations will always be based on assumptions that are themselves subjective and can never be exhaustive enough to achieve a "correct" pricing of the business. What assumptions are chosen as the grounds for appraising the business matter greatly, as well as who is performing the appraisal and for whom s/he is performing it. If one of two dissimilar stakeholders were supposed to assess the value of a business, there would be a risk of that person putting more weight on those factors which would support a high or a low valuation - whichever of the two favoured her/his client. When an expert appraiser is engaged to assess a business, it is of paramount importance to select one who is qualified for the job, is experienced in business brokering and appraisal, and is independent of the entity requesting the appraisal.

 

No valuation is ever so carefully prepared that it can demonstrate the "correct" value of a business. The only correct estimate of a firm's value is the price at which the buyer and seller are both willing to close the transaction.