BUSINESSTOWN Selling Your Business? It Might Be Worth More Than You Think

Fast and Simple Business Valuation

How to Value Your Small Business: Multiple of Earnings Although there are many different ways to value small businesses, I consider the core method for valuing small businesses, especially very small businesses, to be “multiple of earnings.” In looking at multiple of earnings, you first want to ask: Are we talking pretax earnings, which some... READ MORE

Business Valuation Using Book Value

When Should You Use the Book Value Approach to Business Valuation? I see book value as generally a very secondary approach to valuation. For buying a very tiny business, you can probably just ignore it unless there are significant assets involved. Book value is a good way to test valuations of companies that have significant assets,... READ MORE

Business Valuation Using Discounted Cash Flow

What Is the Discounted Cash Flow Approach? Discounted cash flow sounds difficult, but it’s really not. Furthermore, this approach has a lot of similarities to using a multiple of earnings approach. In fact, I see multiple of earnings as kind of a shortcut to discounted cash flow. The discounted cash flow approach is based on... READ MORE

Business Valuation By Specific Industry Research

Another way to value a business is to figure out which valuation method is most commonly used in your target industry, and then take it a big step further and ask industry participants for their input on valuation. The Industry Research Approach Is Particularly Appropriate For Middle-Market Businesses I think this approach is particularly useful... READ MORE

How to Value an Unprofitable Business

Suppose you value a money-losing business with the valuation I most recommend for small businesses, the multiple of earnings approach. Plugging in a negative number for profits gives the business a negative value, indicating the seller should pay you to buy the business! Seems crazy, but think about it: if the business is going to... READ MORE