Your Story To Business Success
Your Successful Path to Financal Freedom
Calculating the Value of Your Business
Your business is an asset… Just like everything else you own. But like any other asset you have that you want to sell, you must be sure it is READY to sell.
What is the value? How is that determined? How can you maximize it?
Value
Determine The Value of Your Business
- Gross/Net sales
- Profit Margin
- EBITA
- Enterprise Value
- Business Evaluation
- Rules-of-thumb
Gross or Net Sales
Determine The Value of Your Business
Seems simple enough.. Add up what you had for sales from the previous year, or year to date, and there’s your number.
But what if you had a bad year? What if a pandemic hit? Would that throw everything off?
Profit Margin
Determine The Value of Your Business
What is your profit margin? How is calculated? Is it revenue minus expenses?
Is it what your Tax Advisor puts down on your Schedule C?
EBITA:
Determine The Value of Your Business
What the heck is EBITA? It’s a measure of a company’s financial performance.
E – Earnings
B – Before
I – Interest
T – Taxes
D – Depreciation
A – Amortization
Enterprise Value
Determine The Value of Your Business
Enterprise value is the measure of a company’s total value. It looks at the entire market value, so all ownership interests and asset claims from both debt and equity are included.
Business Evaluation
Determine The Value of Your Business
This would be completed by a third party. You would hire a Business Evaluation firm to do an evaluation on your business. Its an appraisal and will provide a value of your business.
Rules-of-Thumb
Determine The Value of Your Business
Don’t laugh.. But MANY business owners use this as a calculation for what their business or practice is really worth.
It’s a guess. It takes into consideration what Joe-Schmoe, down the street, sold his business for (which is like yours…. But kinda not)
The Bottom Line
there are a few different ways to calculate the value of your practice
This is something that should be thought about, at least 5 years, in advance (closer to 10 actually).
Once your time frame is established, the HOW needs to be figured out.