Small Business Valuation Calculation

small business evaluation

Know The Value Of Your Business…

Do you know what the exact worth of your business is? You are not alone. While many business owners are simply curious about their business worth, some want to sell their business, alongside many others who need a formal valuation for legal proceedings. Regardless of the reason, a business valuation calculator will help you and other business owners to know about the exact value of your business.

What Makes Your Business Valuable?

The value of a business is directly connected with its capability to produce future profits. In respect to this, the ultimate value of your business that a buyer is willing to pay for comes down to two aspects – the return-on-investment (RoI) and the relative risk. That is the value or price of your business significantly increases with higher RoI and lower risks, and vice versa.

However, associating the following characteristics with your business enhances the overall selling worth as they mitigate the future risks of your business and improves its sustainability:

  • Predictable drivers to make new sales.
  • Stable or improving traffic from multiple sources
  • More repeat sales
  • Higher numbers of repeat customers
  • Availability from established suppliers with stable backups
  • Zero legal complications and concerns
  • Potential to grow over time
  • Streamlined and documented systems

How can I easily calculate the actual value of my business?

Traditional valuation methodology to evaluate the exact worth of your business can be simplified into three specific types of methods:

Earnings Multiple

The buyer can deploy the multiples method by depending on the actual size of the business. In the range between 1 to 3, and multiply it by the annual profits. In the case of monthly statistics, in comparison to yearly, the multiple can range between 12-36. This method is generally not used for small business valuation under $5 million.

Comparable Sales

With the comparable sales method, the buyer determines the overall value of your business by comparing your past sales data. These are similar to your business field. Although this method is not particularly accurate, comparing sales definitely forms a clear idea of the value of your business.

Asset Valuation

Through the asset valuation method, you or your buyer can effectively determine the overall worth or potential of your business by evaluation of the various assets. This method considers the pros and cons of each asset of your business and understands the various prospects. This method is usually applied for the strategic implementation of your business for better outcomes.

Where Can You Sell Your Business?

Are you looking to sell your business? Then the following modes can be found adequately profitable.

Broker :

Brokers can be the best option to sell medium-sized businesses that make between $250,000 and $5m in profit per year.

Marketplaces (under businesses) :

If you are a small business or micro business owner that makes under $250k profit annually, then selling your business privately through forums or marketplaces can be the best option.

Investment Banks ($5m and over profit businesses) :

Investment banks or acquisition companies are the more solid options to sell larger businesses that earn more than $5m annually.

10 Business Valuation Calculators To Gauge Your Business Value

Here we are listing down some free business valuation calculators that will help you to effortlessly get started on with determining your exact business value before you sell.

CalcXML

CalcXML provides a wide range of financial tools that allows small businesses to effectively understand the financial prospects of their business through trial and tested models of calculation.

It is extremely easy to use and offers prospective buyers with necessary insights into the business. Moreover, the CalcXML considers all the basic aspects like annual revenue, business risks, etc. and delivers informative results within a very short time.

ExitAdviser

ExitAdviser helps business owners to get in touch with prospective buyers and also provides quick business valuation in line with their support service. The business valuation calculator simply delivers effective results through the evaluation of the business’s net annual profit and sales growth.

EquityNet

As a world leader in crowdfunding, EquityNet has already helped millions of small businesses and companies to raise massive amounts in equity, debt, and royalty-based capital across the world.

As an extension of their services, they offer businesses of all shapes and sizes with a valuation calculator. It thus not only allows you to evaluate your business with respect to your competitors, but also enables you to understand your business’s profit margin, risks, and cash flow.

BizEx

BizEx offers a more advanced free service business valuation calculator through the Multiple Earnings method. It enables you to access instant valuation ranges by utilizing the business’s multiple earnings and provides you with the option to use these numbers over with your broker.

Digital Exits

Digital Exists provides you with a more detailed analysis of business data and delivers an accurate estimate of your business value. It will help you to gauge the market in a better way with respect to your business prospects.

American River Bank

The American River Bank utilizes the discounted cash flow method in its large and small business valuation calculator to determine the exact value of your business. The company claims that this method is more effective and relevant as it considers the future operating conditions appropriately.

Hadley Capital

Hadley Capital uses a different method of EBITDA multiple calculations in its service business valuation calculation. It helps you to determine the accurate value of your small business. However, this method of startup valuation calculator may vary greatly as per the different characteristic features specific to your business.

Hadley Capital’s calculator particular emphasizes on the annual EBITDA of our business, alongside other factors like your annual capital expenditures and revenue income.

MassMutual Financial Group

MassMutual is an insurance provider that supports businesses of all shapes and sizes across the world. Just like the company itself, it’s business valuation calculator also focuses on delivering seamless user experience.

The easy to use calculator ensures that you get clear and accurate estimates of the overall worth of your business within a couple of minutes.

help me

HelpSME provides simple and user-friendly business valuation calculators to small businesses that require support, including tutorials and advice. It uses the special method called Net Present Value (NPV) to evaluate the business’s worth utilizing the future cash flow.

National Life

National Life offers end-to-end financial services and support to businesses. Its online business valuation calculator leverages its industry insights to deliver appropriate market estimates and determines the business’s value by evaluating its future cash flow. Furthermore, the National Life business valuation calculator focuses significantly on the company’s prospect of marketability and compensation.

Although there are several online business valuation calculators available on the web today, they generate absolutely 100% accurate results. Also, neither any two methods of valuation are completely alike, nor this list is exhaustive. Hence you should always consider related business factors before proceeding on with the final valuation.

It is highly recommended that even if you take help of any valuation method or mode mentioned above, you should always pay heed to your homework to make sure that you are selling, or buying, a business at its appropriate rate.