In Chapter 10, we delve into the captivating world of the Real Business Value (RBV) formula, a powerful tool for assessing the true worth of your enterprise. Brace yourself as we unravel the detailed formula that unlocks the essence of your business’s value.
The RBV formula encompasses various components, bringing together financial factors and strategic considerations. It starts with the calculation of Free Cash Flow (FCF), and Human Resources (HR) for each of the seven evaluated aspects. This sum is then divided by seven, providing a baseline for financial evaluation.
Next, we explore the Value-Added Investment (VAI) component, combining the VAI values for human (h), process (p), structural (s), and relational (r) factors. Again, this sum is divided by seven, ensuring a comprehensive perspective on value addition.
To account for the Valuation Coefficient Assessment (VCA), we introduce the VCA function, which takes into account the impact of each factor (h, p, s, r) on the RBV. Additionally, we consider the variability of risk (VAR) and its adjustment factor.
Finally, we incorporate the Assets at Market Value (AVM) and the Liabilities at Present Value (LPV) to complete the equation. The RBV is determined by combining these elements Knowledge Assets and Equity at Market Value (KA + EMV), considering the interactivity of the human, process, structural, and relational quadrants and their correlation with wealth creation.
Prepare to embark on a journey of profound valuation insights as we uncover the intricate details of the Real Business Value formula. By applying this method, you’ll gain a comprehensive understanding of your business’s true worth and its potential for generating wealth.
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