Research shows that only 2% of owners know how much their business is worth. All business owners should know what their companies are worth.
Business valuation can be used to determine the fair value of a business for a variety of reasons including sale value, establishing partner ownership and divorce proceedings. There is a lot of ways to value a business based on the criteria you set forth.
Common approaches to business valuation include a review of financial statements, discounting cash flow models and similar company comparison. Estimate your earnings for the next few years and ask how much that income stream is worth to you. A good business broker can help you if he or she has done valuations in your industry.
Most business owners rate their business worth by the stream of cash but Revenue is not good approximation of the worth of a business because Revenue doesn’t mean profit. A business might be generating revenue of over a hundred million naira per annum and still not making any profit.
For anyone interested in where to start in calculating the value of a business and getting their valuation right, CompexAfrica recently introduced to the Nigerian Business Ecosystem a free online business valuation tool on its website (www.compexafrica.com) designed to create an estimated market value for a company based upon a diverse set of attributes.
So for Entrepreneurs who need to put a value on their startups or growing business in order to raise money, and investors who need to put a value on their investments – know the value of your Business in just minutes using the free online business valuation tool.
Article was written by Fredrick Ereku