Do you know the value of your business? You may know how much capital you originally put into it, and how much hard work and time it has required over the years. But what about the actual, bottom-line amount? It is actually fairly simple to find, but the estimate your reach is not the final answer. Read below to find out the different business valuation tools that can help you.
What Is Business Valuation Software?
Business valuation is a process, or set of procedures, that is used to determine an approximate economic value of a company, whether publicly or privately held, of an owner’s interest in a business. It is commonly used when an owner is considering selling the business and needs to find a price for market.
Calculating the Value of a Company.
Below are a couple methods to consider for your business valuation approach.
- Use Market Capitalization
-Only for publicly traded companies.
-Subject to market fluctuations.
-This is also the most straightforward method when using business valuation software.
Use Comparable Companies.
-Works only for privately held companies.
-Business valuation software finds companies with similar sales to profit ratios, of the same size, and in the same industry.
-However, the comparable company does not necessarily need to also be privately held, it can be a publicly traded company.
The ‘How’ and ‘Why’ of Business Valuation Analysis.
You will only need two items to find a rough estimate of valuation. These are an income statement and a balance sheet going back three to five years. Ultimately this is an exercise in economic analysis. It should be kept in mind as well that business valuation will fluctuate, partly because of what is formally known as the premise of value and the standard of value. How a business is valued, as well as when, matters. This is an important fact to keep in mind during the process.
In short, the value of a business can be found in one on three ways: based upon the company’s currant assets; a comparison to other businesses that have recently been sold at market; or by taking a look at the business’s risk assessment and earning power. Business valuation services are a necessary step before putting your business on the market. More information like this.