Knowing what your business is worth will assist you in deciding whether to spend on a new piece of equipment, to recruit partners or investment funds. It can also provide a baseline for the way your company’s finances are performing, and could be useful to compare it to other companies in your field.

To assess the value of a company, add up all the assets, including property and inventory, then subtract any debts or liabilities. This method could be an ideal starting point but it’s important to remember that your business is much more than its assets and liabilities.

For a more accurate estimate it is possible to use the market method that is based on what similar businesses have sold for. This method utilizes seller’s discretionary earning, or SDE. It is similar to EBITDA but it includes things like charitable donations and employee outings.

Another option is to base your evaluation on revenue, utilizing the annual sales as a multiple. The multiple will vary depending on the market trends, your company’s size and. A experienced business advisor or broker can offer guidance on the most appropriate method for your specific company. Regardless of which method you decide to use, it’s important to update your calculation regularly and speak with an expert business appraiser for the most accurate representation of your company’s value. They can also assist you to prepare for a possible purchase or sale of your company.

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