A Simple Framework for Valuing a Business in Nigeria

I propose two simple routes for estimating the value of a business or prospective venture: valuation by entry barrier and valuation by profitability. The entry-barrier method starts with the minimum capital needed to operate sustainably. For example, I use a small Nigerian trading business requiring about ₦1.5 million in startup capital and compare its expected return with alternative rental or fixed-income returns. The profitability method values a business from its proven annual profit. Under this personal framework, a venture making ₦1 million yearly after expenses could be assigned a higher value based on the return expected from invested capital. A business with both operating and unfinished assets, such as a hotel expansion, may combine both methods. These are simplified valuation ideas rather than a substitute for professional due diligence. Market demand, cash flow, risks, debts, assets and management quality should also be considered before investing.

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