How to know how much your business is worth
4 January 2023
You’re prepared to sell your company and use the money you make to fund your retirement or your upcoming project. The market worth of your company may be established in a variety of ways.
Add up the asset value. Add up the worth of all the company’s assets, including all of its inventory and equipment. Subtract any obligations or debts. The balance sheet value of the company is at least a place to start when figuring out how much the company is worth. However, the company is likely worth far more than its net assets. What sort of sales and profits? ability should you anticipate.
Consider the revenue. How much money does the company make each year in sales? Calculate it and, with the help of a stockbroker or business broker, estimate the value of a typical company in your sector at a certain level of sales. It may, for instance, be normally two times sales.
Count the profits. The price-to-earnings (P/E) ratio, which is a multiple of the company’s earnings, is likely a more pertinent metric. Calculate the company’s expected future earnings. If the expected earnings are $200,000 per year and the normal P/E ratio is 15, the company y would be valued $3 million.
Analyze the discounted cash flow. The discounted cash-flow analysis is a complicated method that projects the company’s yearly cash flow into the future and then, using a “net present value” calculation, discounts the value of the future cash flow to today. Finding and using an online NPV calculator is simple.
Move past mathematical calculations. Don’t just rely on crunching numbers to determine the worth of the company. Think about your company’s worth about its location. In addition, if there are business synergies, take into account its possible strategic worth to an acquisition.