The value of your business depends on future earnings or cashflow. There is also the assets you own, which could be machinery, property or in terms of your human capital. There is also the stock you own and any vehicles. There is also the value of your brand, plus what debts the business has needs to be taken into account. There may be value in intellectual property. This guide gives pointers about how to value your business.
Assets can be tangible, such as property, machinery or vehicles, but there are also more intangible assets, like the employees or value of your brand name. If you own your offices or factory site, it will have a value, as will the machinery and vehicles owned by the business. These are simple to estimate with the help of experts. People and brand is less simple to quantify and, in terms of brand, will be as much guestimate than anything else. People-wise, it may depend on their contracts and equity positions.
A strong order book going forward or a record of regular profits are a good place to start in terms of a valuation. A business is often valued at a multiple of earnings. The multiple depends how big the business and how big the profits. Intellectual property also has a value and should be kept in mind. Consider debt levels and factor in the point of the economic cycle and state of play in your sector. Seek expert advice on how to value your business. Get more than one opinion.
A strong client base can be worth a lot. If they are blue-chip, with strong history of trading with you, then estimates can be taken on future earnings potential. If small clients have become big ones, or if you have a history of being recommended by clients, these will both be good indicators of your company's value. Are your relationships profitable? Assessing the combined worth of these clients, the assets and future earnings is one thing, but external economics will also have a bearing, so keep all estimates realistic.
While you want to make as much as possible from the sale, any estimated value must be realistic. You may speak to business brokerage firms that quote an attractive but very high price, while others may undervalue it because they either don't have the industry knowledge or don't have the contacts. A fair price is what you're looking for so shop around and get more than one opinion. Ultimately, you will only sell the business once, so do your research, get a figure in mind and stick to your guns.
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