Calculating the Market Value of Your Small Business the Right Way

business valuation

Before you even consider hiring a business broker and selling your small business, it is essential to establish the accurate market value of your company and make an informed decision on what your next step should be. This business valuation might help you decide whether to sell your business or not, or it could ensure that you get a lot more for it than what you initially thought it might be worth.

One of the first things you have to look at is how your business has performed in the past few years (or right up to its inception, if it hasn’t been around for long) and see how quickly it has grown. The main idea behind this evaluation is that some business ideas are simply more successful than others, when set against the background of timeless trends, fluctuations of markets over the years, and the sociopolitical scene of the time. If your business was able to grow quickly with minimal investments, and it’s still achieving increasing profits each year, that means its market value might be even higher than you thought.

Another factor in the business valuation is the total financial worth of your company depending on the assets you own, the money you’ve invested and the debts that you still have to recover from. Depending on the actual dynamics of your business, your profit might fluctuate, but the ratio between the money you’ve put into it and your yearly profits will not change unless you do something to change it yourself – such as get a new loan or sell some of your assets. Because of this, the assessment of your debts, assets and profit (or lack thereof) will be one of the best ways to get a complete picture of how much your business is currently worth financially.

Of course, even a small business that sells simple, practical tools such as pens and pencils will be worth more than its mere financial assets. That is because small businesses have a lot of potential for growth in general, and you never know what will be the next big business idea that, when added to your business, will take you from earning a few thousands a month to making millions of dollars.  There have been countless examples over the years of simple ideas that have turned low earning and even mediocre small businesses into billion dollar enterprises in a matter of just a few years. So look at your business from a greater vantage point, if you truly want an accurate assessment of how much it might be worth.

There are many more ways to determine exactly how much your small business is worth and whether you should keep it or sell it. However, even if you learn about them, it will be a challenge to know which ones are actually relevant to the type of business you own or not. This is why it is essential to find a professional local business broker to help you out with all the evaluations and considerations regarding your company. Then you will be in a better position to make a clear choice about selling your business and even getting more money for it than you expected to get.