If you’re like most small business owners, you have a serious problem on your hands. You don’t know how much your business is worth. You have so much of your own money and your own assets tied into it that it is impossible to get a value. Actually, you can get a business valuation, but you will need some help.
A business financial advisor can determine how much your business is worth. Then, you can use that information to your advantage.
What Goes into a Business Valuation?While there are several options for valuing businesses, most small business advisors choose between two methods. These two methods are the most popular for business valuation.
- Assets-based valuation is one method. If the financial advisor uses this, he or she will add up all of your assets and then subtract your debts. Of course, your business financial advisor will also have to consider how much of your personal money is tied up in the assets when coming up with the number. This is the most basic method of valuation, and it usually provides the lowest number.
- Because of that, a savvy business financial advisor will typically use discounted cash flow valuation. In order to do this, the business advisor has to look at your positive cash flow. Then, the advisor projects future profits and applies a discount rate. The discount rate is necessary due to the time value of money. Your business advisor will base the discount rate on risk and cost capital.
Using Your Business Valuation to Your Advantage
Once you get your value, you will be ready to come up with a financial plan for your business. Again, your business financial advisor can help with this. Small business advisors take on many roles, making it much easier to run your business. Knowing how much your business is worth is an important step in running your company. Get a value for your business so you can make wise decisions that will help you today and in the future.
Charles P Myrick CPA specializes in accounting services for small business start ups and entrepreneurs. If you are a new entrepreneur, give us a call. We invite you to learn more about the small business accounting services that are available: (202) 789-8898.