To find out how much your business is worth, consider these methods:
- Use a business valuation calculator There are several free online business valuation calculators that estimate your business’s current value using methods such as discounted cash flow
- Return on investment (ROI) ROI uses your business' net profit to work out its value
* The formula for ROI is: ROI = (net annual profit/selling price) x 100
* The formula for value or selling price is: Value (selling price) = (net annual profit/ROI) x 100
- Tally the value of assets Add up the value of everything the business owns, including all equipment and inventory, and then subtract any debts or liabilities
- Base it on revenue Calculate how much the business generates in annual sales, and then determine how much a typical business in your industry might be worth for that level of sales
- Use earnings multiples Estimate the earnings of the company for the next few years. If a typical price-to-earnings ratio is 15 and the projected earnings are $200,000 a year, the business would be worth $3 million
- Discounted cash-flow analysis This complex formula looks at the business’s annual cash flow, projects it into the future, and then discounts the value of the future cash flow to today, using a net present value calculation
- Market-Based Approach: Compare your business to similar companies in the market that have been sold recently. Base the valuation on the prices at which comparable businesses were bought or sold, considering factors such as industry, size, growth prospects, and financial performance
- Asset-Based Approach: Value a business based on its tangible and intangible assets. Tangible assets include physical properties like real estate, equipment, and inventory. Intangible assets can include patents, trademarks, copyrights, brand value, and goodwill. Determine the fair market value of all the business’s assets, deduct liabilities, and arrive at the net asset value
To get a more in-depth business valuation, you can get a free business evaluation and consultation from a business valuation firm
