Seasoned professionals know this little known fact.  Valuing a business is not completely a science neither is it completely an art.  While there are many known and time tested method of valuing businesses, at the end of the day there are a lot of subjective elements that play a huge part in the valuation process.  Several sophisticated methods can be used to estimate potential business valuations but finally it all come down to what the buyers are willing to pay.

Now let us look at the few methods of business valuation that are out there.  One of the common approaches to valuing a business is the income approach.  Under this approach the valuation is based on future discounted income of the company.  This method relies on the accuracy of cash flow projections and will depend on the market conditions that will prevail.  While a financial investor can feel good about knowing the returns the business will provide, in some industries this can be hard to predict.  How many of us would have predicted the current financial meltdown we are experiencing and its impact on income & cash flows?

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MSNBC states “CIT Group Inc.’s board approved a deal with major bondholders to keep the company out of bankruptcy with a $3 billion rescue loan, according to published reports. CIT’s failure could pose a major threat to the economy, industry representatives have warned. A collapse of CIT could cut off financing just as businesses need it most during the ongoing recession. Its failure could force thousands of companies to drastically cut costs or shut down — driving up unemployment and dashing hopes for a swift economic recovery”

Now that CIT has secured $3 billion to keep it’s doors open for at least the rest of the year, one question small business owners should ask their state representatives is why the federal government doesn’t see it necessary to bailout CIT when it bailed out all the big corporation from wall street?