“Fair market value” is a powerful term in the business and finance world but what does it actually mean? There are variations of definitions of fair market value depending on the standards but us, valuators, mostly use the term “fair market value” as defined by the Internal Revenue Service (IRS) in its Revenue Ruling 59-60 - “the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts”.
There is a great amount of literature about valuation methods such as asset approach, income approach and market approach and even though applying these methods can get extremely complicated, the end result is that we will use the most reliable method to determine the value of an enterprise.