How a business is valued?
Each and every business is very different and have different valuation methods. Some of the major things to take into account when a business is valued include:
- Financial performance, in particular profitability
- The business industry
- Location of the business
- Assets the business owners
- Intellectual property rights
- Real estate owned
- Business Revenue model
- Client list
- Cleanliness of financial records
- Existing staff
- Eease of entry by competition.
While there are a variety of other things to consider depending on the type of business, these are some core things to consider. Generally all of these items are taken into consideration and a multiple will be placed on owners discretionary cash flow, EBITDA, or gross sales. Generally any real estate or assets with transparent value will be added to the business value itself.