Business Valuation Methods
In reality, there are many ways to value a business and many factors that can affect its value.
These include tangible factors such as profitability - historic, current and forecast - the extent of contracted income or recurring revenues, the strength of the balance sheet - net asset value - etc.
Tangible factors are comparatively easy to quantify because they are valued according to financial ratios or market rates.
How to value your business?
The question of how to value a business is frequently asked buy business owners whether they are actively trying to sell their business or being merely inquisitive.
The second category of person usually enquiring about the value of a business are people looking for a valuation for divorce purposes.
Regardless of whether you are selling your business or enquire a business valuation for divorce purposes, it is essential that you realistically price your business to ensure you receive a reasonable volume of interested parties at a price that is acceptable to you.
Tangible valuation factors include:
• Profit, revenue and cashflow
• Fixtures and fittings
Intangible factors are more difficult to evaluate because ascribing a value is more of a subjective judgement.
They can include:
• The business's reputation and longevity
• Relationships with suppliers
• Goodwill - ie, your reputation among customers and potential customers
• Quality of products and services
• The value of licences
• Patents of intellectual property
• Quality of your employees
• Level and quality of competition (and potential for new market entrants)
• Volume of repeat business
At Jacob & Jones, our business valuers will have an in-depth meeting with you to assess each aspect of your business and discuss the range of business valuation method's available and decide on the most appropriate method for your businesses.