What is your company actually worth?
Every founder has a number in their head. The moments that matter, selling shares, raising money, settling disputes, demand a number that survives scrutiny.
That is what a business valuation is for. This guide covers the methods used in Hong Kong, when you genuinely need one, and how to prepare.
When You Actually Need a Valuation
Valuations are bought for events, not curiosity. The common triggers in Hong Kong:
- Selling or transferring shares, including to family or co-founders
- Raising investment and negotiating equity
- Stamp duty adjudication on share transfers
- Shareholder disputes and buyouts
- Financial reporting items that require fair value
- Divorce or estate matters involving company shares
Different triggers demand different rigour. A negotiation aid is one thing; a report for a court or the Stamp Office is another.
Method 1: Income Approach
The income approach values a business by the cash it will generate.
The best-known version is discounted cash flow, which forecasts future earnings and discounts them to today’s value. It suits established companies with predictable cash flows.
Its weakness is that the output is only as honest as the forecast. Aggressive projections produce impressive valuations that no buyer or valuer accepts, which is why assumptions get challenged first.
Method 2: Market Approach
The market approach values your business by what comparable businesses sell for.
Valuers look at pricing multiples, commonly of earnings or revenue, from similar transactions and listed peers, then adjust for size, growth, and risk. It grounds the number in reality rather than spreadsheets.
The Hong Kong challenge is comparability. Private deal data is thin, so choosing genuinely similar comparables is where the skill, and the argument, lives.
Method 3: Asset Approach
The asset approach values the business as its assets minus its liabilities, adjusted to current values.
It fits holding companies, property-heavy businesses, and wind-down situations. It is also the floor for many valuations, since a profitable business is usually worth more than its parts.
For a services company with few tangible assets, this method understates value badly. Method selection is itself a judgment call, and a good valuer often triangulates between two or three.
Valuations and Stamp Duty on Share Transfers
This is the valuation trigger Hong Kong founders meet most often without expecting it.
Stamp duty on a share transfer is assessed on the higher of the price paid or the net asset value behind the shares. Transfer shares cheaply between related parties and the Stamp Office can assess duty on the real value instead.
One client planned a HKD 1 share transfer in a company holding property. Proper valuation first meant the duty was calculated correctly and no dispute followed.
What a Valuation Costs and Who Does It
Cost follows purpose and rigour.
An indicative valuation for internal decision-making is the lightest and cheapest. A full formal report for a transaction, the Stamp Office, or a court sits higher, priced by complexity of the business and the standard the report must meet.
Ask what the valuation needs to withstand, then buy that level. Paying for a formal report to settle a casual internal question wastes money in both directions.
How to Prepare So the Number Holds Up
Valuers work from your records, so the records set the ceiling.
Prepare clean financial statements for recent years, up-to-date management accounts, and defensible forecasts with stated assumptions. List one-off items, related-party transactions, and anything a stranger would question.
Messy books do not just slow the valuation. They push every judgment call against you, because uncertainty discounts value.
Final Thoughts
Business valuation in Hong Kong is a toolkit: income, market, and asset approaches matched to the event that triggered the question. The number that matters is the one built for its purpose, on records that hold up.
If shares are about to move or investment is on the table, value first and negotiate second.
Need a defensible number on your company?
ABLE Hong Kong arranges business valuations for share transfers, fundraising, and disputes, and prepares the accounts they stand on. Book a free consultation.
Frequently Asked Questions
What are the main business valuation methods?
The income approach (value from future cash flows), the market approach (value from comparable transactions), and the asset approach (assets minus liabilities). Valuers often combine them.
When does a Hong Kong company need a formal valuation?
For share transfers and stamp duty adjudication, fundraising, shareholder disputes and buyouts, certain financial reporting items, and legal matters involving shares.
How does valuation affect stamp duty on share transfers?
Duty is charged on the higher of the price paid or the underlying net asset value. Undervalued related-party transfers get reassessed, so valuing first avoids disputes.
How much does a business valuation cost?
It ranges widely with purpose and complexity. Indicative valuations for internal use cost least; formal reports for transactions or courts cost more. Match the rigour to the need.
What documents does a valuer need?
Recent financial statements, current management accounts, forecasts with assumptions, and disclosure of one-off items and related-party dealings.
Can I value my company myself?
For internal curiosity, roughly. For any transaction, tax, or dispute purpose, an independent professional valuation is what counterparties and authorities accept.