Business valuation calculator

Looking to acquire a business, or sell a percentage of your own? Use our helpful business valuation calculator to get a rough idea of what a business is worth.

Ian Hawkins

Page written by Ian Hawkins. Last reviewed on June 24, 2024. Next review due October 1, 2025.

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Business valuation methods:

  • Asset valuation: This method assesses the total value of a business’s assets, including tangible assets like property and equipment, as well as intangible assets like patents and goodwill.
  • Discounted cash flow (DCF): DCF calculates the present value of a company’s future cash flows, taking into account factors such as risk and the time value of money. It provides a comprehensive view of a business’s potential earnings.
  • Earnings/revenue: This method evaluates a company’s worth based on its historical or projected earnings or revenue. It often involves applying a multiple to the company’s earnings or revenue to estimate its value.
  • Market comparison: This approach compares the target company to similar businesses that have recently been sold or valued. It assesses factors such as industry trends, market conditions and, and financial performance to determine a fair valuation

What makes a business valuable?

  • Financial performance: Strong and consistent financial performance, including revenue growth, profitability and, and cash flow.
  • Market position: A business’s market position, brand reputation and competitive advantage can differentiate it from competitors and increase its value.
  • Growth Potential: The potential for future growth, innovation and expansion can significantly impact a business’s value, attracting investors and buyers.
  • Assets and intellectual property: Tangible assets, such as property and equipment, as well as intangible assets like patents, trademarks and intellectual property, contribute to a business’s overall value.
  • Management team: A skilled and experienced management team capable of driving growth, executing strategic initiatives and mitigating risks can enhance a business’s value.
  • Market conditions: External factors such as industry trends, economic conditions and market demand can influence a business’s valuation, impacting investor sentiment and valuation multiples.

How is the value of a business calculated?

The value of a business can be calculated using various methods, depending on the nature of the business and the purpose of the valuation. Here are three common approaches used to determine the value of a business:

  1. Market-based approach: This approach relies on comparing the business to similar companies in the market that have been sold recently. The valuation is based on the prices at which comparable businesses were bought or sold, considering factors such as industry, size, growth prospects, and financial performance. This approach assumes that the market value of similar businesses reflects the value of the subject business.

  2. Income-based approach: This approach focuses on the income generated by the business to determine its value. One common method is the discounted cash flow (DCF) analysis, which estimates the present value of the business’s future cash flows. It takes into account factors like projected revenue, expenses, capital expenditures, and the time value of money. The DCF analysis calculates the net present value of these cash flows to arrive at a valuation.

  3. Asset-based approach: This approach values a business based on its tangible and intangible assets. Tangible assets include physical properties like real estate, equipment, and inventory. Intangible assets can include patents, trademarks, copyrights, brand value, and goodwill. The asset-based approach involves determining the fair market value of all the business’s assets, deducting liabilities, and arriving at the net asset value.

These are general methods used in business valuation, but it’s important to note that the specific circumstances of a business may require a combination of approaches or the use of other specialised methods. Additionally, factors such as market conditions, industry trends, competition, management expertise, and potential risks can also influence the final value of a business.

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