Knowing what your business is worth can aid you in deciding what to spend on a piece of equipment, to recruit partners or money for investment. It also can provide an indicator of your company’s financial performance and allow you to compare it with other companies in the same field.

To assess the value of a company to determine its worth, add all the assets like inventory and property, and take away any debts or liabilities. This could be an excellent starting point however, it is important to remember that your company is more than its assets and liabilities.

You can use the market method for an accurate estimate. This method is based upon recent sales of similar businesses. This method utilizes seller’s discretionary earning, also known as SDE. It is similar to EBITDA however it also includes other things like charitable donations and employee outings.

Another option is to base the evaluation on revenue, utilizing an annual sales multiple. The amount of money you earn can be different based on the market and trends, and a knowledgeable business adviser or broker can offer advice on what’s appropriate for your particular company. No matter which method you choose it’s essential to update your calculations regularly and consult with an expert business appraiser to get the most accurate assessment of your company’s value. They can also assist you to prepare for a possible acquisition or sale of your business.

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