Knowing the value of your small business is important especially if you plan to sell it or look for investors. Calculating business’s value ca be tricky but it is not impossible for you to get the most accurate numbers. Estimating the economic worth of your business can be challenging especially if you are not financial expert. So how can you figure out what your business is worth?
Most common reasons for valuing business
People value business for many different reasons. However, the most common reasons include the selling business, planning on selling stock in the company, trying to attract investors, a bank loan, simply understanding business’s growth. Therefore, you can estimate and calculate your business’s value even if you don’t have any particular reason. It is beneficial to know what your business is worth for your own knowledge.
Business valuation for investors and buyers
For buyers and investors, business valuation is vital so they can make the right decision with the information. They also need the value to be in a form of valid evidence so they get better understanding of how much money is reasonable to invest. Improper valuation of business should done properly. Otherwise, it can lead to various financial issues in the future such as upset investors, unimpressed buyers, and damaged reputation.
Methods used for business valuation
To valuate your business’s worth properly, you need to use the proper methods. There are two common methods used called Discounted Cash Flow Method and Comp