Small Business Valuation - Rules Of Thumb And Multiple Of Sales

If you've been thinking about selling your business, it can be a daunting process, especially if there's no clear market value for your company. There are many factors that go into Small Business Valuations and, in this post, we'll discuss some of the most common methods used by investors to arrive at an estimated value.

How to Value a Business Calculator

A business valuation is an estimate of the value of a company. A professional business valuation will typically be performed by a third party, who may or may not have ties to the industry in question. The purpose of a business valuation is to determine what price should be paid for an asset, such as real estate or intellectual property (IP).

There are several common reasons why you might want your company's value appraised:

• You're selling it and want an accurate appraisal so as not to overpay;
• You're buying another company and need an idea how much your target would cost;
• You're considering making changes within your organization--for example hiring new employees--and need some guidance on whether those changes will increase profitability

Small Business Valuation Rules of Thumb

There are a number of rules of thumb that can be used to estimate the value of a small business. These include:

• Multiple of Sales: This is the most common approach, where you take the current year's revenue and divide it by some multiple (usually 2 or 3) to get an estimate of your company's worth. If you sell $100K per year in product or service, then your business might be worth between $200K and $300K using this method.
• Multiple of Earnings: Here we look at historical earnings over time to find an average return on equity for the company--basically how much money does each dollar invested earn back? Then we use that average ROE as our valuation multiple when calculating what our business might be worth today if we sold off all its assets and paid off any debt owed against them (which would leave us with net cash).
• Book Value: Book value refers generally speaking only to tangible assets like equipment or property rather than intangible assets such as goodwill (elements like brand recognition). Book value is calculated using historical costs less depreciation over time; although there may be some debate about whether this accurately reflects true market value when compared against other methods described here!

The multiple of sales method is a common way to calculate the value of your business. The How To Value A Business Calculator assumes that if you were to sell your company, it would be worth a certain amount based on its annual revenue.

Conclusion

We hope this article has given you some insight into the process of Small Business Valuation. If you're looking to sell your company, we can help! The expert team of professional accountants and financial advisors will be able to assist with all aspects of the sale including setting up an accurate valuation and preparing financial statements for potential buyers.