How to Calculate your Business Value Step-by-Step
For someone to be able to figure the actual value of their business they have to assess the business dynamics which holds the business in place and weigh both the assets and liabilities that are involved in the business. Business appraisals are critically useful in two instances; when you want to access the level of growth of your business over a given period of time and when it comes to selling the business as a form of figuring out the real value of the business in the market in relevance to it status among competitors in the some industry. Certified public accountants are responsible for assessing the value of a business by having considerations of its assets. The assent base of a business and the income made by the business are some of the considerations that are used to find the actual value of a business.
Five steps are used to determine the actual value of a business. The initial step in business valuation is to prepare the documents that should be needed in the process and determine your reasons for having the business valuation. How you measure the business value and the circumstances involved are some of the valuables involved in determining its value. The next is adjusting the financial statements of the business.Adjusting the financial statements of the business is the second step. To determine the future trend of a business you need financial statements of about 3-5 years. In this step balance sheet and income statements are very important in creating a correlation on how much the business makes profits and adjusting the accounting books in order to increase capacity of the business.
The third step is choosing the business valuation method which can fall under three categories which are; asset approach, income approach and marketing approach. Equally choosing the method of business valuation will depend on a number of considerations as follows; value and amount of fixed assets owned by the business, the business earning history, competitive edge of the business in the market, availability of the data of a business cost of capital and the trend of possible business earnings in the future.Putting into use the method chosen in step three is done, furthermore, using a number of methods is recommendable since some aspects of important business considerations can be realized.
Finally, you will reach the final business value where you may have slightly different values due to the different methods which are referred to as business value synthesis. Having the different business worth you need to make up some supportive opinion on picking any of the value as the business worth.