How Much is Your Business Worth? Value It With a Business Valuation Calculator

Valuation Potential

There are more than 10 ways to value your business. Each method will provide you with a slightly different answer. One of the more common methods that business brokers use is to value your business is based on how much cash the business will generate in the long term. Business brokers then discount this cash to today’s value. This allows Business brokers to gain a clear understanding of the value of the business in today’s value.

With online calculators assumptions need to be made in order to generate a valuation figure. Given the value of your business profit, we then need to understand how much actual cash you have available in the business. Probably the largest player to impact upon this level of cash is the tax man. The tax man unfortunately wants a significant slice of your profits. When your business therefore earns a profit of $100,000 you effectively only end up with a lesser amount in the bank, as cash after you have paid your tax bill.

The other major assumption that needs to be made, is what we call the “weighted cost of capital”. This might be more simply referred to as the risk of lending money to the business. If your business is a low risk proposition and your future income is guaranteed then this figure would be down at around 4%. However for most small businesses there is a high degree of risk that earnings will remain constant over the next 10 years, so we apply a risk factor of 15-20% or even greater for higher risk enterprises.

With online business valuation calculator, the model calculates your sales and profits over the next 10 years and then discounts this by the “weighted cost of capital” rate.

There are many more factors that could be taken into account including capital injections and expenditures, depreciation and even whether the owners of the business are being paid a fair salary.

Online Business Valuation calcutors can provide an indicative valuation of a business by using discounted cash flow and weighted cost of capital.

How Much Is Your Home Based Business Worth?

If the electronic energy in your body’s hydrogen atoms could be utilized, scientists have calculated that a person could supply all the electrical needs of a highly industrialized country for almost a week. By this estimate, the average person is worth about 85 billion dollars! Never sell yourself short. You are unique and immensely valuable as a human being. The payments you receive from life are what vary from person to person.

Anyone building a business for themselves is actually building a lifestyle regardless of who signs the paycheck at the end of the week. You hold the office of the President of your own corporation, which makes you responsible for success and failure. The members of your team are the stockholders and it is your job to see that the value of the stock increases in the years ahead.

Even though the operations of a corporation are complex, they can be reduced to four basic functions: Finance, Production, Sales and Research. Without proper financing, there would be no production. Without production you would have nothing to sell. Without sales you would have to stop production. Without research you could not keep up with the changing times. All four of these functions must flow in unison in order to have a successful business. How successful you are in meeting these challenges will determine your present and future growths.

You must be concerned with growth because nothing in this world stands still. A body in motion tends to remain in motion until acted upon by an outside force. A company that is growing has a tendency to keep growing. The same goes for a company that is either standing still or falling backwards. All responsible business owners should be able to look into the future and predict how well they will progress based on their current level of activity. Never before in the history of mankind has an individual had the opportunity to make a brighter future for themselves than now.

Stand back and look at yourself and your future objectively, as an intelligent stranger might. Ask yourself what you are worth right now. What is your value to your business and what is the value of your business in the marketplace? If you were an outside investor, would you want to invest in your company? If not, then change the reason why. Give personal attention to the growth of your business so it doubles in one year instead of eight. Find a timely business model that has achieved what you want and follow it. If you do twice as much, you are bound to receive twice as much. It sounds simple, but 95% of business owners can’t grasp it. Knowledge is power.

Sales is more than selling a product or service, it’s the way in which we sell ourselves to everyone who is interested in what we have to offer. It is the way we get along with our associates, our families, friends and neighbors. One extra call a day leads to 250 extra calls in a year. In 5 years that comes to 1,250 calls that you wouldn’t have otherwise made. A person can triple their effectiveness in less than a month. How have you been handling the four basic business functions? How much time are you really putting into moving forward?

Home based business owners have to be harder on themselves than any strict boss at a regular job could ever be. Yes, the reason we want to work from home is the have the freedom of doing what we want, but we can’t build a business with that attitude. You have to put the time in to set your business up first. Then we have to constantly strive to improve our effectiveness so we never have to worry about going back to being a puppet of the corporate giant. It’s all up to you to make these decisions. It’s the difference between being worth an average amount of money and an above average amount.

Tomorrow is a brand new day. Begin to think of ways in which you can increase your effectiveness.

What’s Your Business Worth?

At least once a week a dealer will ask me what I think his business is worth. A business broker friend of mine tells his clients that “your business is only worth what someone else is willing to pay for it … and that may be a whole lot less than you thought.” Concerns over decreasing values of wireless businesses are real but don’t have to be cause for panic. Unfortunately, the days of getting multiples of revenue with a cursory glance of the balance sheet are gone.

The failure of so many “dot-coms” has given new meaning to the words, due diligence. The process has become much more complicated and the computations much more intricate. The factors that now determine the overall “worth” of a business in today’s climate reach well beyond the scope of the businesses’ bottom line.

Our organization doesn’t sell businesses, but we do help them get ready to sell. The good news is that there are steps you can take to dramatically increase the value of your business. The criteria and questions below represent a great exercise for all businesses, regardless of whether they are considering looking for a buyer or not.

We find that most businesses don’t really know the answers to a lot of the questions, but some can quickly double or halve the perceived value of their business in the mind of a potential buyer by putting some relatively simple practices into place. These items are critical to the overall health of the business. When someone asks us to help a business increase its net worth, we begin by looking at the following areas:

Profit & Loss Statements

Most financial analysts will look at the “quality” of your data and “trends” over the last two or three years to determine if your business is on the rise, or on the”demise.” First they’ll look at the bottom line to see if there is one. Then they’ll look for trends, and most importantly, if your net profit as a percentage of revenue is rising or falling. The final test is to determine if the percentage is healthy enough to make a buy recommendation to a potential purchaser.

Portfolio of Products and Services

Do you have a mix of products that makes sense for your business? Is each category profitable? Some dealers think they need to carry every wireless carrier to be able to serve the needs of every customer that calls or walks in. This is more often than not a very unprofitable way for a dealer to go to market. Instead of having an outstanding relationship with one or two manufacturers or carriers, they diversify their business to the point of having very little leverage to negotiate or receive additional support because they demonstrate no loyalty in return. In most cases, we recommend that dealers pare back the number of products and carriers they represent as a means to INCREASE their sales and profitability.

Expenses

Are your expenses in line with revenues? A major red flag goes up if your trend shows expenses growing faster than revenues. This signals trouble to potential buyers. Look at your key expenses as a percentage of revenues and compare them with the last two years. Keeping fixed and variable expenses in line is critical to business valuation.

Revenue Areas

Today, most buyers are interested in businesses that are growing. If your sales and margins have been steadily increasing, you pass the first test. Next comes a look at whether your manpower levels are appropriate and productive. Retention and experience counts too, as expertise is valuable to both customers and buyers of your business. What are your “costs of sales” as a percentage of revenue? There are a lot of things you can be doing to drive sales up in your operation from providing sales training to performing sales meetings. A management and motivation process similar to the popular CDI Beat Your Best(TM) program demonstrates structure, measures results and adds value.

Customer Base

One of your most valuable assets is your customer database. The number of “active” customers and the average value of a relationship over time are key ingredients for determining the “worth” of a business. Thus, the business with processes and procedures for maintaining and growing customers over time are worth more. These are some of the most important criteria for determining a business’s worth and we could certainly spend a lot more time on each category and how to build it. Other items such as fixed assets, real estate, infrastructure and recurring revenue streams are also important considerations. This outline will provide you with the basis for creating a written plan for improving each one of these areas. Buyers today are a lot more critical about the value they place on your business. The more you can do to impact each of these areas, the more your business will be worth to a potential suitor. As my friend says: “Your business is worth exactly what someone else is willing to pay for it.” Now that you have a better look at what someone else will see, “what’s your business really worth?”