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How to place value on your company


Business owners often are overly optimistic when placing a dollar sign on the value of their companies.The reason for this is that the emotional value is often quite high.If you have put your blood, sweat, and tears into your company for years it will be hard to objectively put a price tag on the company.Fortunately, there are some guidelines to help you place a realistic value on your company.

The bottom line is that your company is worth only as much as you can get someone to pay for it.You can do all of the bookwork and come up with a bottom line but if you cannot find a buyer at that price, the company is not worth that amount.The selling of a business can be the most discouraging part of business ownership because of exactly this.The buying company will try to pay as little as possible, you will try to make as much as possible.The worth of your company falls at the point where these two strategies meet and the final price is settled on.


To get started placing a value on your business you can use business valuation software.This software is available online and typically uses a cash flow method the set a price for your business.To use this software you will need all of the financial records for your company because the cash flow method considers the bottom line, that is, how much money do you clear every year and how much money is owed to investors and financial lenders.This is something you will need to work on with your financial officers if you have them.If you don't have a financial team, consider hiring a consultant when you attempt to valuate your company.

One thing that you must consider when placing a value on your company is if you are selling the assets of the company or if you are selling the shares of the company.A successful company, that is one with a positive cash flow or positive cash flow potential, will be worth more than the sum of the parts.If you company is not making money, you may have to sell off the equipment and contracts individually.Think about this difference as the difference in selling a car or parting a car out.It only makes sense to part out a car if the car doesn't run as a whole.If you sell the whole company, or the shares, find out what is included in the sale.This will help determine the value.

Once you have done all of the paper work and you have an idea about what the company is worth, contact the potential buyers.This is delicate and needs to be handled with non-disclosure agreements because one the word gets out that you are selling the company the value may plummet.Customers and employees are afraid of ownership changes and you may lose valuable accounts if rumors of selling start to leak out.Narrow down your buyers to a few who are serious and have the means and then let them bid on the company.This is the only way to know what the company is really worth.

When trying to put a value on your company in order to expand you should look at the book value.This means that you will subtract your assets from your liabilities.The positive difference between assets and liabilities is the collateral that you will be able to offer on business loans.This method may yield a lower bottom line than the price tag of the company because things like intangible assets and earning potentials are hard to realize with this formula.

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