You must know the exact value of your business before you go ahead and sell it in the United Kingdom. You should be ready to process your finances and, you need to be ready for your next venture. There are so many ways you can determine the value of your business in the market. In this guide, that is exactly what I’m going to be talking about.
- Firstly, you need to tally up the value of all of the assets. You need to add the value of everything, and you need to know what exactly the business owns and what it does not on. It should include all equipment and inventory as well. Go ahead and make sure you subtract any of the debts and liabilities.
- Next, you need to keep in mind the value of the business balance sheet, and you should know a decent starting point so that you can determine the value of certain things. The business is probably worth a lot more than the assets. That is exactly something that you should always keep in mind. You need to know how much revenue and earnings you can be expecting.
- See if you can base it on the revenue. You need to know how much the business can generate when it comes to annual sales. Make sure that you calculate and also determine through the help of a stockbroker or even a business broker.
- A measure that is a little more relevant is probably the multiple of the earnings of the company. You need to know the projected earnings of the company as well. If the projected earnings are around $200,000 a year, the business could be worth more than $3 million.
- You also need to do a discounted cash flow analysis. The discounted cash flow analysis is something that is a very complex formula that will look at the annual cash flow of the business and also projects it into the future. It will then discount the value of the future cash flow to today, making use of net present value calculation. You can make use of the NPV calculator.
- You should also keep in mind that you should be going beyond the financial formulas. You should never just base your assessment of the value of the business on number crunching. You need to consider the geographical location of your business. You need to see if it is far away from the centre of the city or if it is in a locale where people pay a lot for the geographical location. The geographical location will actually end up contributing quite a bit to the overall value of the business. You will find that places in central London are much more expensive when compare to other places.