Whether you’re thinking about selling your business or considering a buyback offer from your partners, determining your company’s value is a critical decision. The most common method estimates the value of your business by calculating the amount of income it’s expected to earn over time.
Another method is to add up all your assets (such as equipment, real estate and so on) and subtract your liabilities (such as outstanding loans and debts). This method is useful for investors who want to know the present value of your business.
You can also determine the value of your business by looking at earnings or revenue. A standard practice is to multiply the company’s EBITDA (earnings prior to interest, taxes, amortization, and depreciation) by two to six. This can be used for small or mid-sized companies. It is important to keep in mind, however, that multiples vary based on the nature of the industry and the particular characteristics of your business.
While guidelines can be helpful, they don’t offer the complete view you need to determine the value of your company’s assets for sale. Many experts recommend consulting with valuation experts, who will assist you in weighing the pros and cons of your choices. They will take into consideration the past performance, stability in assets and liabilities, and growth forecasts to give you a precise estimate. They can also advise you on how to improve your operations or financial structure to boost valuations. Consult your accountant, business advisor or a professional broker to assist you in finding the best expert.
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