How to Evaluate a Business Worth For Sale

Assessing the worth of your business is crucial, whether you’re planning to sell your business or are contemplating a buyback from partners. The most common way to assess the value of your business is to consider its expected earnings over time.

Another approach is to add all your assets (such as equipment, real estate, and other equipment, and so on) and subtract your liabilities (such as outstanding loans and debts). This method is great for investors who want to know the current worth of your business.

You can also assess your company’s value based on its revenue or earnings. A typical practice is to use a multiplier of the company’s annual EBITDA (earnings before interest, taxes, depreciation and amortization) which can range between two and six times revenue for small to mid-sized businesses. It is important to remember that the number of multiples you choose to use is contingent on your industry and specific attributes of your business.

While general rules of thumb may be data room software helpful, they won’t offer the complete view you need to assess the value of your business to sell. Many experts suggest consulting valuation experts, who can help you weigh the advantages and disadvantages of your choices. They can take into consideration the previous profit stability, assets and liabilities, and growth forecasts to give an accurate estimation. They can also provide advice on adjusting your operation or financial structure to boost valuations. Consult your accountant or business advisor or professional broker to assist you in finding the right expert.