How to value your business?

Value creation and distribution is the primary purpose of any business and is the key driver for an entrepreneur on their journey. Your goal always is the creation of value – for yourself, your customers, your employees and the society as a whole.

At different stages of the business life cycle, you’ll reach a point where you’ll have to consider quantifying the value of your business. You‘ll be asking yourself “how much is your business worth”? “What can you get for your business today, after investing all the time, effort and money into it”?

There may be an aspirational value in your mind for what your business is worth, but typically you don’t know how realistic it is. To get to a more accurate figure, you may decide to commission an external advisor. In reality, the true value of your business is the price that a buyer is willing to pay for it. The resulting valuation may come as a pleasant surprise or a shock depending on your perceived value of your business. Generally, as owners, we tend to have a rather optimistic view, which means the estimated valuation may feel below your expectation. That can be deflating and disappointing.

At the end of the day, the whole process of business valuation remains a black box for most entrepreneurs, leaders and shareholders, unless you have a Corporate Finance background. For many entrepreneurs, this triggers questions. What are the different methods of calculation? How are valuation multipliers determined? What is the right valuation method for my business?

In this series of blogs, we aim to take a jargon-free approach to answer some key questions that every founder/ leader/ shareholder may have on business valuation, including:

  1. What is involved in a business valuation?
  2. When should I value my business?
  3. Why traditional methods of valuation don’t apply to valuing a small business?
  4. What factors influence business valuation multiplier?
  5. Small business valuation – how to prepare for it
  6. How to increase the value of my business?
  7. Why valuing tech companies requires a different approach?
  8. What is different about valuing a service business?
  9. What is value-based management for SMEs?

At the end of this series, you will have a greater understanding of how to value your business and what actions you can take to maximise it.