What is your business worth?
The majority of company owners seeking a sale are just trying to find a quick approach to discover the fair market value of their companies.
Many of these business owners aren’t necessarily interested in determining the terminal value, weighted average cost of capital, or discounted future cash flow of earnings. A lot of small business owners don’t need or even want to make it that complex; they just want to get a rough idea of how valuations work and how they can determine what their company is worth using basic math, not complicated formulas on Excel.
So, let’s quickly discover your company’s value rather than going through all the complicated financial formulas that aren’t applicable to the majority of main street business owners.
When it comes to calculating the value of one’s business, try to think of these 3 important methods, Income, Assets, and Market.
Income Method
Financial experts and teachers who enjoy teaching theory embrace this approach. Most small business owners find it difficult to comprehend, let alone calculate. To put it simply, you must anticipate the business’s financials to establish its future economic benefit, adjust for growth rates, cost structures, taxes, working capital, etc., and then discount that benefit to its present value. Discount rates, computations of discounted cash flows, or capitalization of profits are all involved.
Assets Method
Simply subtracting the difference between the company’s assets and liabilities yields the calculation for this strategy. The value of your company would be $80,000 ($100,000 – $20,000 = $80,000) if your assets were $100,000 and your liabilities were $20,000. If you currently have concerns about your company’s profitability, this isn’t the valuation method you’d want to use.
Market Method
This method is probably the easiest to understand. The fundamental idea is to research successful sales of businesses with size, income, and other attributes similar to yours. Your company’s value is dependent on that value.
I have access to a variety of experienced business valuators, and I can help you find a suitable price for your business and help you with all your business needs.
