Before a business owner considers selling his company, he should adequately assess the amount for which he is willing to part with his brainchild. For business owners, his company is a kind of child and he can not always evaluate it correctly. This is especially true for the founders of the company. They make the decision more emotionally. In this case, it is better to conduct an independent valuation business for sale and the company Website Closers is ready to help.
To make sure that all calculations are fair, it is important to understand on what basis you can evaluate your company. Let’s look at the most popular ways of valuing businesses.
Ways of assessing the value of a company
There are several options for business owners on how to determine company value. Each of them has its peculiarities. The most common methods of valuation are
These methods differ from each other and it is important to break down the specifics of each.
Book value
The simplest way how to calculate business valuation is to use book value. For this purpose, the balance sheet of the company is taken. From it, you subtract liabilities from assets. This will help to determine the equity. Next, intangible assets are excluded. The resulting amount will be the real value of companies. This calculation does not always accurately reflect the value of the enterprise, but it can be calculated quickly and used as a reference for bidding.
Discounted cash flows
Analyzing company valuation methods it is important to use this approach. With its help, you can understand how current investments affect the profitability of the company in the future. To calculate for a certain period, you need to divide the cash flow at the end of the term by 1+ the cost of capital and multiply this by the number of years.
Market capitalization
Among the factors affecting business valuation, it is important to consider market capitalization. This is the value of the shares multiplied by the number of shares. In this way, you can understand the real value of the equity of the company and its value in the market. The main disadvantage of this method is the fact that only equity capital is taken into account. In reality, many companies have credit and use borrowed funds.
Enterprise value
Among business valuation techniques, this method is one of the most transparent. To calculate the value, you need to add equity to the company’s debt and subtract the company’s cash. In this way you can find out the real value of your company on the market, taking into account its current debt on loans and borrowings.
EBITDA
When dealing with how to value a small business it is important to consider its profitability or profitability. This approach helps in making such calculations. To calculate this, interest is added to net income (interest expense minus interest income). Then tax and depreciation are added. From the resulting amount, subtract sales revenue, cost of sales, and operating expenses. The received sum will be the real value of the company.
Where to find a reliable intermediary for the valuation of your company
Having understood how to value a company for sale owners can safely hire a reliable intermediary to organize the process of selling the company. This process will go faster from cooperation with a reliable partner. Website Closers company is ready to help in solving these issues and find the best offer for its clients, putting several favorable options on your table. And you will choose the one that suits you best.
