If you are wondering “How do I value my business”, you should know that there are many factors involved in the process. Valuing your business can provide you with leverage when applying for financing, seeking out investors or selling your business. So, how do you value your business? Well, your business is valued according to several factors including, revenue, debt, profitability, goodwill, assets, number of clients and time trading:

  • Business revenue the income that your business has from its normal business activities (typically the sale of goods and provision of services to customers)
  • Debt how much money does your business owe and to whom.
  • Business profitability a measurement of the efficiency of your business and its ability to generate returns on investment.
  • Business goodwill – in accounting terms, goodwill is an intangible asset generated by a buyer when acquiring an existing business and represents assets that are not separately identifiable.
  • Business assets – encompasses the items of value owned by your organization.
  • Number of clients – your client base and the primary source of revenue and business in your organization.
  • Time trading – how long has your company been in business for.

There are also a few methods to consider in working out the value of your business and those are:

  • Current market values this can depend on the industry sector your business is in, and the current value of other businesses like yours
  • Return on investment – this method uses your businesses’ net profit to calculate its value.
  • Business asset value – this should include the value of both tangible and intangible assets in your business: the physical equipment and property as well as intellectual property, brands owned by your business and business goodwill.
  • Cost of starting a business from ground-up – The cost of starting-up your business can also be used to guide the valuing process, by looking at the cost required to build a business like yours in your industry sector, at the current market conditions.
  • Future profit of a business – this method looks at the trends in your business finances from past years, or the trends of businesses similar to yours, operating in your industry to show how your company compares and where the market is headed.

If you are still unsure and need more specific information on how do you value your business, speak to the Taggart & Partners business accountants by calling (07) 3391 1188, e-mail us at enquiries@taggartandpartners.com.au or enquire online for help with and advice on valuing your business.

 *This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

 

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