Skill&Know How Valuation

Skill & Know How Valuation

Special expertise or special skill labor which is basically anything that requires specific and specialized knowledge for example, labor skill. This can also be called “Know-How” that sticks with/attached to each person, affecting the production and service. Therefore, unique expertise is one factor that influences the purchasing of a business, which can be an intangible asset that is part of the business. In this case, if the firms can prove that they have this kind of asset, the skill & know-how valuation can be made in order to obtain the appraised value for example, if the company have an employment contract with someone who is an expert on that specific thing which can be individual or group of people. Hence, when it comes to transferring the business from an old to a new owner with significant evidence, skill & know-how valuation also can be presented in a fair form.

The cost valuation approach is to consider the opportunity cost of recruiting personnel to replace the target team. Assuming that if you do not continue hiring, and there’s a need to seek for replacement, how much will it cost to hire an adequate replacement with equal qualification. While hiring, there is also the opportunity cost of learning curve in which one must gain before being able to perform at fullest. During this period there will be a cost of investing some money into the training.


The income approach method is to consider the ability to generate sales for the profitability of the organization, in the form of teams or individuals based on past performance which are clearly different in skill level, whether performing on the front-line in customer service team or the service provider and the support team behind the scenes. Revenue and profit proportions are divided according to organizational behavior. The projection on the cash flow schedule based on the number of years of the commitment period that may be stipulated.


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