Creating A Blueprint For Wealth

  1. Home
  2.  » 
  3. Business Law
  4.  » What is your business worth?

What is your business worth?

by | Jul 7, 2021 | Business Law

Whether you have recently built your business or have operated it for some time, selling your company can open up new opportunities for future endeavors. Knowing the value of your business will provide you with the information you need to receive a fair price. What business valuation methods could you employ?

Determining value based on earnings

Investors looking to continue a business’s operations after it has sold will likely make decisions based on past and projected earnings, and that income can also be used to assess the business’s value. An earnings-based model uses potential return on investment to establish a fair price for the business.

Determining value based on a business’s assets

When businesses invest significant portions of their profits on production equipment, inventory or other business assets, an asset-based approach can reflect that investment. This can be done by valuing the business’s current equity or by establishing the value that immediate sale of those assets would provide.

Determining value based on recent sales of similar companies

If companies working in a similar market have recently sold, the sale price of those companies could offer insight into the value of your business through a market-based approach. While this can give you a very clear picture of the price that a company can fetch given current market conditions, this method is only effective if similar companies have recently sold. Without this information, a market-based approach is less effective.

Experienced guidance can help with business valuation

If you are uncertain how to establish your business’s value, working with legal and financial professionals can help you navigate business valuation. Professional guidance can also offer insights into the mergers and acquisitions process and lay the foundation for your future success.

Categories

Archives