Knowing the worth of your business as you progress should not only be necessitated because you may want to sell it in the near future, but it is important to do so to know how prosperous you have been able to build the brand from an idea’s stage into what it has grown to become.
What is more, it is a way of measuring your business growth and evaluating your business to be sure that you are on the right track towards achieving your ultimate business goal.
The worth of a business is not a straight jacket figure that can easily be calculated and supplied; as such, it is more of a subjective figure. Of course you can do a calculation of your assets and liabilities in order to get an idea of what your business is truly worth.
However, from a pure business perspective, the worth of a business is not all about multiplying its annual adjusted net profit (profit before tax) by a profit multiplier. It is the amount a buyer is willing to pay in order to acquire the business or the amount you are willing to sell the business.
If the worth of a business is just all about the assets and liability, where will you place the profit generating potential of the business? In essence, the worth of a company is dependent on who is valuing the company and the factors that are considered when valuing the company. This means that there are no right or wrong approach as long as you follow due diligence when doing your calculations.
Here are few tips that will help you know how much your business is worth;
5 Sure Ways to Calculate How Much Your Business is Worth
1. Take an Inventory of All Your Equipments, and Everything Your Business Owns
First things first; you cannot truly know what your business is worth without an inventory of all your equipment, furniture and all your property. Proper inventory will help you place value on all your office equipment, furniture, and everything your business owns. Although the equipment, furniture, amongst other things may likely depreciate in value, but the idea is to know what they are currently worth
2. Advertise Your Business for Sale in Order to Get an Idea of What Buyers Are Willing To Pay to Acquire the Business
As simple as it sounds, one of the easiest ways of knowing what your business is worth is to list the business for sale in the market and see what buyers are willing to pay to acquire the business. For example; if you place a price tag of $10 Million on your business and most of the people who show interest in buying the business are willing to pay about $8 Million, then the worth of your business is $8 Million.
3. In Order to Know the Worth of Your Business, Value the Company Based on Its Assets
Another process that you should follow if you want to know the worth of your business is to value the assets of your business. There are professionals you can hire to help you with the calculation of the value of all the assets and liability of your business. These folks know how to do the necessary additions and subtractions in order to arrive at an estimated figure.
4. Project and Calculate the Company’s Ability to Generate Sales (Revenue), Its Cash Flow and Profits
In addition to the value of your company’s assets, you will need to project and calculate your company’s ability to generate sales (revenue). The cash flow and profits your business can make within a given period is part of what your business is worth.
5. Hire the Services of Professionals to Help You Get a Figure of How Much Your Business is Worth
In case you didn’t have the skills to do all the necessary calculations that should help you know the true worth of your company; you don’t need to break your head over it or enroll in a college to acquire the skills. You can conveniently hire the services of professionals to help you value your business.
Although, you will be charged a professional fees for their services, but you can rest assured that they will give you the current worth of your business. They can even go ahead to give you a projection of what your company will be worth in 5 year, 10 years or even 20 years if you are consistent with what you are doing.
There you have it. One of the things that you must consistently do to make your business to be worth it is to keep working at building a world class business so that it will be well priced. Hard work, constant research, amongst so many others are some of the activities that you and your team must be willing to embrace of indeed you want to well worth.
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