What's Your Business's Market Value? How to Value a Company

How to Value a Company

What’s Your Business’s Market Value?

Are you wondering what your business's market value is? Read this article to learn how to value a company fairly so you can sell fast and make a profit.

How to value a company

You’re finally ready to sell the business you’ve worked so hard on. The first step of the process is valuing how much your company is worth.

But if you’re new to selling a business, likely you won’t have a clue where to start. Thankfully, there are several ways to work out the market value of your company.

Ultimately, your business is worth whatever you decide it’s worth. But you can make your estimation using various ways to value the company and can choose a mix that reflects your final thoughts.

Keep reading to learn how to value a company.

Work out the Value of the Assets

If you’re wondering how to value a business, the first thing you should do is add up the value of everything the company owns. This includes all the equipment and inventory. Then, you’ll need to remove any debts or liabilities.

After all, a buyer would need to purchase all the same stuff if they were starting the business from scratch, so the company at the very least is worth the replacement cost.

While this doesn’t provide an efficient whole evaluation of a business, it’s a great starting point for understanding a business’s worth. Your final balance sheet will offer a good indication of the value of your business’s assets.

Remember that the company is probably worth a lot more than its assets though. Consider how much revenue and earnings the company pulls in.

Base It on Revenue

This leads us to another method on how to value a company. You can base the value of a company on its revenue.

How much does the company make in annual sales? Work that out and determine, using a stockbroker or a business broker, how much a company within your niche may be worth for a level of sales. For example, it may typically be worth about three times sales.

Explore Beyond Financial Formulas

It’s important not to just base your assessment of your company’s value on figures. For example, maybe the location of your business is extremely sought-after?

Always consider the value of your business based on other factors too, such as geographical location.

How to Value a Company for New Sellers

When considering how to value a company, these are some of the best methods to start with. However, one of the best ways to assist with the process is to consider professional help.

Here at Biznexus, we can help. We help match business owners with the best business intermediaries to help you sell your company for great value, on optimal terms.

The service is free for business owners, and we aim to help improve entrepreneurs’ chances of having a positive experience of selling their business. To learn more about how we can help, check out our website.

BizNexus -Learn More From Our YouTube Playlist:

PREPARING TO EXIT YOUR COMPANY

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.

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Sell my business

You’ve spent blood, sweat, and tears into building your business and now you’re keen to sell it. As with any sale, your goal is to find the right buyer and to sell your business for maximum value.

But if you’re new to the process of selling a business, you may not know the best way to sell your business for maximum profit. Don’t worry, every new business owner has been there.

If you’re thinking ‘I want to sell my business’ then we’re here to help you. Here are our tips on selling a business to gain the best profit.

Determine What Your Business Is Worth

When selling your business, you first need to determine how much it’s worth before putting it on the market. Realistically, your business is worth as much as it will sell on the marketplace. But deciding on that price can be tricky.

Thankfully, there are various business valuation methods out there to help you. These differ from asset-based to future earnings approaches. However, to get the best results you should use more than one method.

The current market, economic trends, and what other similar companies have sold for recently also need to be considered.

Getting a professional business valuation is a must-do. While legally anyone can conduct a business valuation, a company valuation performed by a professional will be viewed more favorably by potential purchasers. What’s more, potential buyers are likely to request a professional business valuation before committing to purchase so this can save you time later.

Be Clear About What You're Selling

When making a business sale, you need to decide exactly what the assets of the company are and decide what you’re happy to sell. Consider which physical assets you’re selling and what other assets you have available to sell.

Selling a business often includes assets like goodwill, trademarks, client lists, as well as physical assets.

The value of such assets will depend on their quality. If your company is incorporated, you must also consider whether you’re going to sell the business as an asset sale. This is where you sell everything in the corporation, apart from the incorporated company itself.

Alternatively, you can go for a share sale. This is where you sell everything, including your incorporated company.

I Want to Sell My Business: Getting Professional Help

When you’re thinking ‘I want to sell my business, one of the best ways to help with the process is to seek out professional help.

Here at Biznexus, we can help. We help match business owners with the best business intermediaries to help you sell your company for the most profit, on optimal terms. The service is free for business owners, and our goal is to help increase entrepreneurs’ chances of having a positive experience of selling their business. To learn more about how we can help, check out our website.

BizNexus -Learn More From Our YouTube Playlist:

PREPARING TO EXIT YOUR COMPANY

Have you checked out our podcast?

THE BIZNEXUS ROUNDUP

Quick & dirty interviews, war stories & tips from the trenches of business acquisition, growth & sale. We aim for value, efficiency & fun, so you'll walk away with something useful to take with you along the journey of buying, growing & selling a business.