Valuing your business is not an exact science

On Behalf of | Jul 16, 2021 | Business Law | 0 comments

Throughout Oregon, many people continue building successful local companies. With that in mind, you might be thinking about selling one of your businesses. Before doing this, it’s helpful to know how much money your company is worth. While it’s an inexact science, here are a few potential ways to value your company.

Asset valuation method

One of the most popular ways of valuing a business is through the asset valuation method. If you chose this method, you’ll need to figure out the fair market value of your company’s assets. By subtracting your company’s liabilities from its total assets, you’ll understand your company’s net asset value.

Multiple analysis

You can also learn about your company’s worth by looking at the value of similar companies in your industry. This method is often utilized in business law matters when the value of a business needs to get determined. If you understand how much your competitors’ companies are worth, it’s easier to determine the value of your own.

Discounted cash flow

Another way to value a company is by using the discounted cash flow method. This valuation method can determine the worth of a business by looking at its future cash flow. The purpose of this analysis is to estimate how much a potential investor would get back from putting money into the enterprise. Since present cash can earn a profit going forward, future cash is worth less. Consequently, the projected future cash flow is discounted back to the present, and the analysis determines this value of the company.

Business valuation methods can help you learn more about your company’s worth. Ultimately, however, your business is only worth what a buyer is willing to pay for it. If you need help properly valuing your business, consider speaking with an attorney.