Understanding the value of your business can help you decide if you should invest in new equipment, find a partner, or secure investment dollars. It can also serve as an overview of how your company’s financials are doing, and can be helpful to compare against other companies in your industry.
One way to determine a business worth is to calculate the value of the assets, such as inventory and property, then subtract any liabilities or debts. This Revolution Data Systems is a great place to start, but you should be aware that your business is more than its assets and liabilities.
To determine a more accurate value it is possible to use the market method that is based on what similar businesses have sold for. This method uses seller’s discretionary earnings, also known as SDE. It is similar to EBITDA however it also includes other things like charitable donations and employee outings.
Another alternative is to base the assessment on the amount of revenue, and use the number of sales per year as a multiplier. The multiplier will differ based on the industry trends, the company’s performance and. A skilled business advisor or broker can provide you with advice on what is appropriate for your specific company. It’s essential to revise your calculation regularly and consult with a professional appraiser to get the most accurate assessment of your company’s worth. They can also help you plan for a possible sale or acquisition of your company.
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