Knowing how much your business is worth can help you decide whether to pay for a new piece of equipment. You can also enlist the help of a partner, or search for investment dollars. It also serves as an understanding of how your financials are performing and can be helpful to compare against other companies in your field.
To assess the value of a company consider adding all the assets such as property and inventory, and subtract any debts or liabilities. This could be a good place to start however, you must keep in mind that your business is more than just its assets and liabilities.
For a more accurate estimate, you can look at the market method which is based on what similar businesses have recently sold for. This method uses seller’s discretionary earnings, also known as SDE. It is similar to EBITDA but it includes things like employee outings and charitable donations.
Another alternative is to base the evaluation on revenue, using an annual sales multiple. The number of times you can multiply it in accordance with the market and trends, and an experienced business adviser or broker can offer advice on what’s suitable for your particular company. It’s crucial to update your calculations regularly and seek out an appraiser who is a professional to get the most accurate assessment of your company’s worth. They can also help you in preparing for a potential sale or acquisition of your business.
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