subject: Suggestions For Business Valuation [print this page] Are you thinking of business valuation? Is it because someone is interested in buying your business or is it just for the sake of knowing the value of your business? If a second party has asked for a meeting to fix the price you need to consider several factors to determine the price. There is nothing to panic even if you dont have a clear idea about your business valuation.
You may get bothered about staffs like How much should you ask?, What if you ask for too much or too little?, Will they laugh at your proposal?, How much your business is actually worth of?
The first thing you do is to consult with your family and friends with no good solution from them. It is quite natural since your family members or friends dont know anything about Business Valuation or M&A. So what you do next is go for online help.
As a result you visit several sites and read numerous articles on business valuation with no concrete answer to your question. You may found many formulas which will offer you results ranging from $25,000 to $250,000. Its ok because you at least get a hint but you remain confused even at this point of time.
Quite natural because you can not decide which value is ideal for your business. Should you ask for $25,000 or $250,000? Well, it depends. Yes, the answer may sound frustrating but it is true. You cant fix the value of your business by any magical formula. You need to take several criteria into account when it comes to business valuation.
The Business Team: The first thing to consider is your business team. If you dont have a great team or a great management your net profit and yearly revenue are nothing but just a number. So business valuation depends a lot on your team.
Market Share & Market Size: Lets explain this with an example. You have two companies sharing the same financial indicator but one with $10 million market and the other with $1 million market. Naturally the growth potential of the first company is much more than the second one. Your market share and competitors also play a great role in determining your company value. If you have more competitors it may indicate less profit and huge marketing investment.
Revenue & Profit Evolution: This point will be also easier to explain with some example. Your company has earned revenue of $10000 in the first year, $40000 in the second year and $70000 in the third year. On the other hand your competitor has earned revenue of $80000 in the first year and $40000 in the second year. Naturally your business value will be greater than that of your competitors.
When someone else shows interest in buying your business explain all these points to him to get the right value for your business.
