There are a number of ways to determine the market value of your business.
- Tally the value of assets. Add up the value of everything the business owns, including all equipment and inventory.
- Base it on revenue.
- Use earnings multiples.
- Do a discounted cash-flow analysis.
- Go beyond financial formulas.
How do you value a small business?
To find the value of your business, subtract liabilities from the assets. For example, if you have $100,000 in assets and $30,000 in liabilities, the value of your business is $70,000 ($100,000 – $30,000 = $70,000). With the asset-based method, you can find the book value of your business.
How do you calculate valuation of a company?
Method 1 Calculating Market Value Using Market Capitalization
- Decide if market capitalization is the best valuation option.
- Determine the company’s current share price.
- Find the number of shares outstanding.
- Multiply shares outstanding number by the current stock price to determine the market capitalization.
What do you need to know before buying a business?
10 Things to Look Out for When Buying a Business
- Make sure you’re buying the assets, not the business.
- Ask about sales taxes and payroll taxes.
- Determine who will deal with the accounts receivable.
- Find out if you can assume the seller’s lease.
- Are there prepaid expenses?
- Negotiate a “letter of intent.”
- Watch out for bulk sales laws.
- Get an indemnity from the seller.