6. Market Approach to Value

This chapter examines the market approach to value, also known as the sales comparison approach. The market approach determines the value of an asset based on the selling price of comparable assets, in keeping with the economic principle of substitution. This chapter discusses the conceptual logic of the market approach and reviews three potentially acceptable ways to value the assembled workforce through the market approach. The primary method reviewed is the residual market value technique, which allocates the acquisition price of a business to its different components. The two additional techniques considered are a value extraction method that compares sales that are similar in substantive ways with the exception of the assembled workforce in place, and the direct sale of an assembled workforce by itself.