How to Evaluate a Business Worth

If you are planning to sell your business, or are just interested, it’s essential to know what your business is worth. It’s not only helpful with financial planning and attracting investors however, knowing the value of your business also aids in negotiations with potential partners and buyers. Knowing the value of your business can be a challenge however there are a few essential steps you can follow to begin.

One of the most popular methods of assessing a business’s worth is to consider the company’s assets and liabilities. This method takes into consideration all the assets that the company owns like equipment or inventory, then subtracts any debts the company has, including commercial mortgages or loans. This value is often referred to as liquidation value, book value, or net asset value.

The value of a company can be determined by looking at its sales and revenue. This method calculates the total revenue and sales of a business, subtracts operating expenses, then multiply it by a multiplier industry. The result you come up with is an estimate of what your business could be worth if it were to go on sale.

The size, the industry, and management team are also factors that influence the value of a company. For example, larger companies are usually valued higher than smaller businesses because they have more resources to devote to product development and marketing. The ability to lead and a well trained workforce are often seen as selling points for a company.

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