Business Brokers Blog: Guide to Buying or Selling a Business

How much money is my business worth? Your answer here

“How much is my business worth?”  This is a question that many business owners often have floating in their minds.  Studies show that on average, 90% of a business owner’s net worth is tied up in their business.

Let’s think about this.  There are business owners that will spend hours and hours watching CNBC researching and monitoring their investment portfolios but rarely spend the time or money to value their company (where a bulk of their worth exists).

Using a sports analogy, a runner that is training for a competition regularly tracks their time to see if their training regimen is improving their performance.  If progress slows, or even regresses, different methods of training are pursued and implemented prior to the race to get back on track.  All of this monitoring and tweaking is part of the process to maximize performance and win the race.

As a company owner, the race is the business exit, which is often the business sale.  By monitoring the company’s value prior to the business exit, an owner can make adjustments in their business operations to increase value.

I am a proponent of an actual third-party business valuation as an annual or bi-annual check-up, even if the intent on exiting the business isn’t for years.  Life is unpredictable and you never know when an emergency situation could require a premature sale.

However, one thing I have learned over the years is that many people have not taken my advice in getting a third-party business valuation, often with the reason being “cost”.  To eliminate this argument completely, I have created a free tool, the Business Value Estimator, to provide business owners with an estimate of business value.

Why is this free?  As business consultant, I frequently represent business owners in the confidential sale of their business.  My goal is to maximize each business owner’s proceeds from the sale.  In many cases, I have wished that business owners implemented strategies years in advance to help improve their value.

Though this tool does not work miracles in coming up with value creation ideas specifically for your company, it does provide you with an estimate of business value.  If you know that you need to sell your business for $X to retire and live comfortably however you find out using the Business Value Estimator that you are off in value by several magnitudes, it shows that a lot of work has to be done to improve your business.  You can come back to the tool to monitor your progression of value as your revenue and earnings grow to see if you are closing the gap.  Answering the question of "how much is my business worth?" has never been easier.