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Three popular ways to valuate your business

On Behalf of | Aug 9, 2021 | Divorce

If you’re the owner of a business in Illinois, it’s understandable to want to know how much your company is worth. Fortunately, there are many ways to achieve this goal. When it’s time to valuate your business, try one of the following methods.

Asset-based valuation

One of the most popular business valuation methods is asset-based valuation. To do this, find out the total value of your company’s assets. Then, take this figure and subtract your company’s liabilities from it. That total will be your company’s equity.

Capitalization of earnings

The capitalization of earnings valuation method focuses on a company’s past earnings by looking at its ROI and cash flow. This valuation method is often used to calculate business interests in divorce. However, this valuation works best for established companies with past data to look at. Without data from previous quarters or years, it could be hard to gauge your company’s predicted future earnings.

ROI-based valuation

If you’re selling or buying part of a business, you might use the ROI-based valuation method. To calculate your company using this method, you would divide the portion of your company getting sold by the percentage another party is buying. If you were selling 40% of your company for $400,000, for example, dividing the monetary value by 40% would give you your ROI figure.

There are many ways to obtain the value of your business because you don’t want to do a lot of estimating. By using one of the above business valuation methods, you’ll help make sure that you and your company don’t get taken advantage of.