How do you value a small business?
Valuing a small business can be challenging or very simple. 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, gross sales, the business industry, location, assets, intellectual property, real estate included, liabilities, revenue model, client list, cleanliness of financial records, existing staff, payroll, leases, inventory and ease of entry by competition.
While there are a variety of other things to consider depending on the type of small business, these are the 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.