Thank you to CO–U.S. Chamber of Commerce for providing the content What Is Your Business Worth? Here’s How to Find Out.
The economic value of your company matters to leaders and interested third parties. Learn how to choose the proper business valuation for your needs.
A business valuation is a great way to understand what your business is worth and can help you improve its value over time. Small business owners also complete valuations during exit strategy planning or when looking for funding. There are several methods for determining your company’s value, and you can use one or more types to get a ballpark estimate. In many cases, the valuation method depends on what your investor, lender, insurer, or buyer needs to know.
To calculate your company’s worth, you’ll need financial records and details about tangible and intangible assets. You may also want to understand market conditions and the value of your competitive advantage. Here are five ways to measure the economic value of your business.
Estimate business value quickly with the market method
In Forbes, business broker and appraiser Trent Lee focused on the market method as a five-minute business valuation. This approach looks at what similar businesses recently sold for. Lee’s system uses the seller’s discretionary earnings (SDE) and a market multiple. According to Corporate Finance Institute (CFI), SDE includes EBITDA (earnings before interest, taxes, depreciation, and amortization), one-time expenses, non-related business expenses or income, and adjusted expenses.
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