Understanding your business's value isn't just for selling – it's essential for making informed decisions about growth, investment, and long-term planning. While there are many complex methods for calculating business value, we'll break down the most practical approaches and show you how to use them effectively.
In addition to the calculator, we put together a guide to explore the most common business valuation methods, explain how to calculate them step-by-step, and help you understand which approach makes the most sense for your situation.
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**Important Notice: This calculator provides general estimates based on the information you enter and should not be considered professional financial, tax, or investment advice. The results are approximations for informational purposes only and may not reflect your actual financial situation or outcomes. Market conditions, tax laws, contribution limits, and other factors can change and may significantly impact your results. We recommend consulting with qualified financial, tax, or legal professionals before making major financial decisions. Your actual results may vary considerably from these estimates.
Different businesses may benefit from different valuation approaches. Here are several widely-used methods to consider:
This method examines what your business owns versus what it owes.
Basic Formula: Business Value = Total Assets - Total Liabilities
Best suited for:
Consider that: This approach may not fully capture the value of intangible assets like customer relationships or intellectual property.
This method focuses on your business's income generation potential.
Basic Formula: Present Value = Annual Income / Required Rate of Return
Best suited for:
Consider that: Future income projections involve various assumptions and market factors.
This method considers recent sales of similar businesses in your industry.
Service Business Formula: Value = (EBITDA × 1.5) - (Current Liabilities × 0.5)
Retail Business Formula: Value = (EBITDA × 1.3) / (Revenue - Cost of Goods Sold)
Best suited for:
Consider that: Finding truly comparable sales data can be challenging.
Need help understanding market comparables and your valuation?
Find financial advisors with business valuation expertise.
This approach focuses on operational performance.
Basic Formula: Business Value = EBITDA × Industry Multiple
EBITDA can be calculated as:
📈 Here's a link to Investopedia's full guide on adjusted EBITDA
Consider that: Industry multiples vary significantly and change over time.
While this guide may provide useful context, nothing can replace the impact of professional financial guidance from an advisor who specializes in working with business owners. A financial advisor who specializes in business ownership can offer experience and insights for:
Use AdvisorFinder to find financial advisors who specialize in working with business owners
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💼 or, Browse all Financial Advisors who work with Businesss Owners
The best valuation method depends on several factors specific to your business:
Understanding these key factors helps you improve your business's value over time.
👉 20 Questions to Ask a Financial Advisor About Business Planning
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