How To Determine The Value Of A Business

If you think that you might want to sell your business in the near future, you’re going to have to determine its value. It’s important that you set the right price for your business if you want to find a buyer. If you’re unable to have your business professionally appraised, these are a few ways to calculate the value of a business.

Look At Your Assets And Liabilities

Take the time to calculate all of your businesses assets. Once you’ve finished doing that, you’ll want to do the same thing for your company’s liabilities. From there, you can simply subtract the business’ liabilities from its assets. If you have $75,000 in assets and $25,000 in liabilities, the value of your business would be $50,000.

This method will allow you to determine the book value of a business. Evaluating a business’ assets and liabilities will also show you how you can increase the value of your business before you sell. If you’re able to reduce your liabilities, you could substantially increase the value of a business.

Compare Your Business Against Recently Sold Businesses Similar To Yours

Take the time to look at businesses similar to yours that were sold in the last few years or so. Pay attention to how much those businesses sold for. Consider whether your business is likely to sell for more or less than the businesses you are looking at.

Looking at businesses that recently sold will let you see what people are actually willing to pay for a business similar to yours. Businesses don’t always sell for their book value. It’s not unusual for a business to sell for substantially more — or less — than that.

Consider The Financial History Of Your Company

If you want to find a buyer for your business, you’ll want to demonstrate that your business is a smart investment. You should take a look at the financial history of the business and work to show that the business is profitable.

If your business has struggled in the last year, investors might see it as a high-risk investment, which means the total value will be lower. Selling a thriving business is easy, but selling a business that isn’t doing well is a more difficult process.

Now that you know how to determine the value of a business, you can work to find the right price for your business. If you price your business appropriately, you’ll be able to attract buyers right away.