Definition of investment value
When a business is sold to an investor as a whole then the investment value is value of the business on the basis of ROI that is return on investment. Investment value is also sometimes known as “going concern” valuation. By “going concern” valuation, we mean the value of a business which is not expected to close and will function continuously. Such a business will be ongoing and will be open for business.
Overview of investment valuation/ “going concern” valuation
A going concern is a well established business which is well managed and has a strong customer base and stands in a competitive position in the market. A going concern is a business which makes profit year after year. It is a business which has its own brand identity and whose products and services are considered to be of very good quality. A going concern also has a strong marketing presence and continues to attract and bring customers to the business.
Many a times, investment valuation or “going concern” valuation is considered to be the highest form of valuation of a business.
By investment value, we mean the value or worth of a property to an investor. In U.K. and in the U.S., this investment value is equal to the market value for the investors who have a good vision and are capable of making a good use of their property, which is its highest and best use or its most valuable use. However, the investment value is not equal to the market value for those investors who do not have proper vision and lacks capacity. In fact, for them, the investment value is less than the market value because they are unable to make proper use of the property and so their property is not used to the fullest extent. The investment value of a particular property to an individual may be more or less than the market value and this is dependent on the investor’s situation.
For example, the investment value of a land which falls in the path of growth is more for a young investor who has enough time to wait for end result, but it is less for an old man who needs regular cash for his living.