How to Evaluate a Business Worth

Knowing how much your business is worth can help you decide what to spend on a piece of equipment, enlist partners or investment dollars. It can also serve as a baseline for the way your company’s finances are doing and can be useful to compare your business’s performance against other companies in your industry.

One method of assessing the worth of a read the article business is to count the value of the assets, like property and inventory, and subtract any debts or liabilities. This is a good starting point, however, it’s important to realize that your company is more than its assets and liabilities.

For a more accurate valuation, you can look at the market method that is based on what similar businesses have sold for. This method employs seller’s discretionary earning, or SDE. It is similar to EBITDA but it includes things like employee outings and charitable donations.

A multiple of annual sales can be used to assess revenue. The multiplier can differ in accordance with the trends and industry, and a knowledgeable broker or business advisor can give you advice on which method is appropriate for your particular company. Whatever method you choose it is important to revise your calculation on a regular basis and communicate with an expert business appraiser to get the most accurate estimate of your company’s worth. They can also assist you in preparing for a potential sale or acquisition of your business.

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