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Q: I am evaluating your business valuation software with a view of buying it. Since I am not a financial type I have a question. When I input the information I am getting a negative number for the expected valuation. Does this mean the business is no good?
A: A negative valuation basically means that to provide the required return the vendor needs to pay you to take the business of their hands. But remember that by changing the required return (decreasing it in this case) the valuation will change. What you need to determine is what return is acceptable to you considering the business, associated risk, and your situation. From the required return the value of the business will be calculated. If the valuation is positive the business is viable at that price. If the valuation is negative the business is not worth anything.
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