If you’re looking to sell all or part of your business, you need to have some idea on the value of your business. It’s important that the valuation of your business is a faithful representation of your business’ worth. Valuation is not an exact science, and there are many different ways of reaching a value on a company. Here are some things to factor in when putting a price on your business:
Your discounted cash flow:
From an investor’s perspective, this is the single most accurate and effective way to estimate a business’ value because it’s based on future cash flows. These figures estimate the amount of money that is expected to come into the business, which will ultimately help the investor determine their return on investment.
This is simply your assets less your liabilities, and reflects the net worth of your business as shown in its financial statements. Your book value will show investors the economic value of your business net of any accumulated depreciation.
Investors are interested in the going-concern value of your business – essentially, whether or not your business has the capacity to generate a stream of cash flow in future operations. The more cash your business generates in the future, the higher your business we be valued at today.