https://www.dataroomsolutions.blog/how-to-evaluate-a-company-worth/
Knowing the value of your business can help you decide if you should invest in new equipment, find an investor or secure investment funds. It also serves as an overview of how your business’s finances are performing, and could be useful to compare your business’s performance against other companies in your field.
One way to evaluate a business worth is to calculate the value of assets, like inventory and property, and then subtract any debts or liabilities. This approach may be an excellent starting point but it’s important to remember that your business is greater than its assets and liabilities.
You can use the market method for an exact estimate. This method is based on the recent sales of similar businesses. This method is based on seller’s discretionary earning, or SDE. It is similar to EBITDA but also includes things like employee outings and charitable donations.
Another option is to base your evaluation on revenue, using the number of sales per year as a multiplier. The multiplier will differ based on the market, trends and your company. A skilled business advisor or broker can provide suggestions on the best method for your specific business. It’s essential to revise your calculations on a regular basis and consult a professional appraiser to get the most precise picture of your company’s value. They can also help you prepare for a possible sale or acquisition of your company.
POSTED BY
John Avery
4th September 2024
