How to evaluate the value of a business

In many cases, it is required to assess the real value of a business. In modern conditions, the turnover does not always reflect the real income of the owner, since it may not take into account costs. For this reason, the main factor affecting the value of a business is the income that the business brings.

Instruction manual

1

For a qualitative assessment of the business, first of all, evaluate the entrepreneurial income, that is, the amount that the owner of the enterprise earns monthly after paying taxes and wages to employees of the enterprise. In addition to the profit of the enterprise, entrepreneurial income may also include the salary of the owner, which he receives as the general director of the enterprise, as well as the salaries of other family members working for the company.

2

Find out if the company operates on its own or on leased premises. If a business operates on leased premises, Russian investors consider it acceptable if the price of the business is equal to entrepreneurial income for 7-18 months. Sometimes investors, for some reason interested in acquiring a particular business, are willing to pay for the enterprise an amount equal to the income for 24-30 months. Profitability requirements for companies that are sold together with owned real estate are usually not so high. A price equal to the total profit for a period of two to five years is considered normal.

3

When evaluating the value of a business, apply one more criterion - the quantitative ratio of potential buyers and companies proposed for sale. In recent years, enterprises in the service sector, public catering, and food business have been in greatest demand.

4

Evaluate how high-tech the enterprise is. Relatively expensive are sold companies whose management does not require specialized training. So, many investors regard car washes as enterprises whose development does not require original and costly marketing strategies, so the buyer is ready to pay for such an enterprise more than 30 sizes of monthly profits.

5

Calculate the possible risks. For some buyers, the absence of risk or "dark" parties to the transaction justifies a higher price. A company with a completely transparent accounting, even with not too high incomes, will be of great value.

6

Evaluate company assets. In the presence of high-tech and expensive equipment, as well as real estate, the residual value of such objects is added to the cost of cash flow.

7

When evaluating a business, consider a stable customer base and trained company staff. Sometimes the business reputation of the company also matters.

How to determine the real value of a business