How to Value a Company
What’s Your Business’s Market Value?
Are you wondering what your business's market value is? Read this article to learn how to value a company fairly so you can sell fast and make a profit.
How to value a company
You’re finally ready to sell the business you’ve worked so hard on. The first step of the process is valuing how much your company is worth.
But if you’re new to selling a business, likely you won’t have a clue where to start. Thankfully, there are several ways to work out the market value of your company.
Ultimately, your business is worth whatever you decide it’s worth. But you can make your estimation using various ways to value the company and can choose a mix that reflects your final thoughts.
Keep reading to learn how to value a company.
Work out the Value of the Assets
If you’re wondering how to value a business, the first thing you should do is add up the value of everything the company owns. This includes all the equipment and inventory. Then, you’ll need to remove any debts or liabilities.
After all, a buyer would need to purchase all the same stuff if they were starting the business from scratch, so the company at the very least is worth the replacement cost.
While this doesn’t provide an efficient whole evaluation of a business, it’s a great starting point for understanding a business’s worth. Your final balance sheet will offer a good indication of the value of your business’s assets.
Remember that the company is probably worth a lot more than its assets though. Consider how much revenue and earnings the company pulls in.
Base It on Revenue
This leads us to another method on how to value a company. You can base the value of a company on its revenue.
How much does the company make in annual sales? Work that out and determine, using a stockbroker or a business broker, how much a company within your niche may be worth for a level of sales. For example, it may typically be worth about three times sales.
Explore Beyond Financial Formulas
It’s important not to just base your assessment of your company’s value on figures. For example, maybe the location of your business is extremely sought-after?
Always consider the value of your business based on other factors too, such as geographical location.
How to Value a Company for New Sellers
When considering how to value a company, these are some of the best methods to start with. However, one of the best ways to assist with the process is to consider professional help.
Here at Biznexus, we can help. We help match business owners with the best business intermediaries to help you sell your company for great value, on optimal terms.
The service is free for business owners, and we aim to help improve entrepreneurs’ chances of having a positive experience of selling their business. To learn more about how we can help, check out our website.
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