How much is your business worth?

By Tina Zawila

Often the first time a business owner seriously asks this question is when they are ready to sell their business (and they usually want it sold ASAP!).   And unfortunately, the answer often isn’t anywhere near the figure they want or need.   In fact, most of them have no idea how to calculate the value of their business, or how a potential purchaser would calculate it, and instead are just going on their own “gut feel of what it’s worth”.

Why is it that most business owners don’t know, or monitor, the value of one of their largest assets?  Most will tell you that their business is their “superannuation” – and yet they don’t receive an annual statement to tell them what it’s worth, and maybe they don’t understand their financial reports enough to be able to calculate their annual return on investment.

At Sothertons, we believe you should be tracking the value and growth of your business throughout your business journey, not just when it’s time to sell.

I’m not suggesting that you need to have a full business valuation prepared, but you should at least be having a discussion as to the potential value of your business with your advisor at least annually.  You should have an understanding of how a business in your industry is valued and therefore how you can maximise the value of yours.   Business value is also a good measure of the success of your business strategies and operations.

If you plan to sell you business in the foreseeable future (in the next 3 to 5 years) then you definitely should be having this conversation with your business advisor NOW.  The sale of your business should be well-planned to maximise the return on your investment.

Ultimately, the value of a business is determined by a willing buyer and a willing seller, however, if you are the seller, you should be confident that your asking price is appropriate and well-supported. 

If you need advice on the value of your business contact our professional team today on 49721300.