The In’s and Out’s of Small Business Valuation
Understanding the value of your business is crucial. This is true whether you are looking to raise funds to expand, admit new partners, incentivize key employees, or retire and capitalize on your hard work and effort. While not as easy to measure as a bank account balance, understanding the value of your business may prove vital to appropriately planning for your future.
Business valuation can be quite simple or highly complex depending on how accurate the estimate needs to be. For a basic indication of value, you’ll first need to understand your earnings. This may mean any number of things, so its important to clarify. Large Public companies tend to look at Net Income (using terms such as earnings per share), but for many small businesses, Net Income becomes a bit less reliable of a measure. A more nuanced version of earnings will probably be more appropriate depending on your business.