Value Your Business

How to accurately value your business

Valuing your business is an essential part of preparing for the next stage of its evolution, whether that’s an injection of capital to help it grow in exchange for an equity stake or a full sale that could eventually see the exit of its founders. Ultimately, as with any asset, a business is only worth what someone is prepared to pay for it, and at least some of that will depend on the wider economic climate and the demand for the product or service that’s on offer. But there are ways in which business owners or entrepreneurs can get an idea of what their business is worth. These include: Earnings or profits-based valuation. This is where either earnings or profit is used as a measure of market value. Metrics include earnings before interest, tax depreciation and amortisation (EBITDA), operating profit (EBIT) or seller’s discretionary earnings, which is often used for small firms.