To have the knowledge of your business value is very important to keep it updated with the new trends in the market. It tells the actual situation whether the business holds the capability to expand on a wider level or not. It is also very important for a owner looking to sell his business. Accurate valuation of a business is a very long process but very important. It is like an art with which everyone has a different way to express.
Below mentioned are some of the way which can help a person owning a business to determine his business worth-
Calculate the overall value of all the assets,accounts,equipments of your business which will give help you to estimate the liquidation value of your business.
* Liquidation Value- It refers to the price of the assets which are allowed to sell in the market with insufficient time. It consist of levels like- market value,book value and salvage value. It remains higher than salvage value and lower than book value.
Now if i talk about the assets based valuation than it is not generally applicable for small businesses. Their main work is to generate revenue. This valuation is very important as it explains the relation between the assets and the revenue which is being generated by them. Let’s explain it with the help of an example- If a company is very rich in assets but does not make a good or a profitable revenue then there is no use of that, if a company has less assets but is able to make a high level of revenue than it’s excellent.
* Rule Of Thumb Method- This method provides simple advice in reference to a particular subject. It gives practical instructions to complete a certain task in the given period of time.It also help to know about the financial guidelines of a company. It is also good option to know your worth.
* Market Capitalization:– Calculate your company’s market value,having a data of it will let you know the value of the share you have in the market. It is calculated by multiplying the company’s stock with the total number of shares and it gives an overall idea about the size of the company.
This method is used by public traded companies where the value of shares can be easily determined. It has one disadvantage and that is it depends on the trends going on in the stock market, if the stock market declines than it will also decline and vice versa. Always remain updated about the share price of the company.
Try to remain update about the share price your company currently holds in the market. It will tell you about the growth level of your company whether it is in profit or loss which is very important to calculate market value.
Outstanding Shares:- Determine the number of shares of the company stock that are outstanding as it will tell you number of people having the share of your company. It is very helpful to estimate your worth.
These are some of the ways you can adopt to calculate the worth of your business.