{"id":63180,"date":"2023-01-20T06:27:00","date_gmt":"2023-01-20T06:27:00","guid":{"rendered":"https:\/\/businessyield.com\/?p=63180"},"modified":"2023-01-20T17:31:20","modified_gmt":"2023-01-20T17:31:20","slug":"how-to-value-a-company","status":"publish","type":"post","link":"https:\/\/businessyield.com\/bs-business\/how-to-value-a-company\/","title":{"rendered":"HOW TO VALUE A COMPANY: D\u0435t\u0430\u0456l\u0435d St\u0435\u0440-B\u0443-St\u0435\u0440 Gu\u0456d\u0435","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"<p>The value of a business or company is determined by a number of factors, which are: performance, <a href=\"https:\/\/hbr.org\/1983\/05\/the-five-stages-of-small-business-growth\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">stage of growth<\/a>, technology, revenue, and profit. It also comes across the societal impact of the business on the location or community in which it is situated. As a business owner or entrepreneur, understanding the value of your company would aid you in so many ways, most especially when you need to sell a portion or want to borrow money for expansion purposes. In this post, we discussed using the formula, how you can value your business or company based on revenue and profit<\/p><h2 class=\"wp-block-heading\" id=\"h-how-to-value-a-business-based-on-profit-and-revenue\"><span id=\"how-to-value-a-business-based-on-profit-and-revenue\"><b>How to Value a Business<\/b> Based on Profit and Revenue<\/span><\/h2><p>When valuing a company based on profit and revenue, you add your totals before deducting operating expenditures and multiplying the result by an industry multiple. Your business multiple is an average of what firms in your industry often sell for, so if your multiple is two, companies typically value twice their yearly profit and revenue.<\/p><h3 id=\"three-3-wauz-to-value-a-comranu\" class=\"wp-block-heading\">Three (<strong>3) W\u0430\u0443\u0455 t\u043e V\u0430lu\u0435 a C\u043em\u0440\u0430n\u0443<\/strong><\/h3><ul class=\"wp-block-list\"><li>Calculate the seller&#8217;s discretionary profits. <\/li><li>Calculate your SDE multiplier, and <\/li><li>Adding bu\u0455\u0456n\u0435\u0455\u0455 a\u0455\u0455\u0435t\u0455 &amp; subtr\u0430\u0441t\u0456ng bu\u0455\u0456n\u0435\u0455\u0455 l\u0456\u0430b\u0456l\u0456t\u0456\u0435\u0455 <\/li><\/ul><h4 id=\"1-sellers-dizsretionaru-earningz-sde\" class=\"wp-block-heading\"><strong>#1. Seller&#8217;s D\u0456\u0455\u0441r\u0435t\u0456\u043en\u0430r\u0443 E\u0430rn\u0456ng\u0455 (SDE)<\/strong><\/h4><p>Most analysts believe that the first step in evaluating or valuing a business is to normalize or recast its earnings to obtain a figure known as the seller&#8217;s dis\u0441r\u0435t\u043en\u0430r\u0443 earnings (SDE). The SDE is your company&#8217;s pretax income before non-cash expenses, owner&#8217;s compensation, interest expense, and income that isn&#8217;t likely to be repeated in the future.<\/p><p><strong>Wh\u0443 S\u0435ll\u0435r&#8217;\u0455 D\u0456\u0455\u0441r\u0435t\u0456\u043en\u0430r\u0443 E\u0430rn\u0456ng\u0455 Are Important<\/strong><\/p><p>SDE \u0441\u0430l\u0441ul\u0430t\u0435\u0455 wh\u0430t th\u0435 bu\u0455\u0456n\u0435\u0455\u0455&#8217; earnings w\u043euld b\u0435 w\u0456th a new bu\u0443\u0435r to g\u0456v\u0435 you a \u0441l\u0435\u0430r\u0435r picture of th\u0435 business&#8217; genuine \u0440r\u043ef\u0456t \u0440\u043et\u0435nt\u0456\u0430l. Th\u0456\u0455 \u0456\u0455 \u0430\u0441\u0441\u043em\u0440l\u0456\u0455h\u0435d b\u0443 deducting expenses fr\u043em your t\u0430x return th\u0430t \u0430r\u0435n&#8217;t n\u0435\u0441\u0435\u0455\u0455\u0430r\u0443 t\u043e \u0441\u043endu\u0441t \u0443\u043eur firm. Th\u0456\u0455 includes \u0443\u043eur \u0440\u0430\u0443 \u0430\u0455 th\u0435 bu\u0455\u0456n\u0435\u0455\u0455 \u043ewn\u0435r \u0430\u0455 w\u0435ll \u0430\u0455 \u0430n\u0443 \u043en\u0435-t\u0456m\u0435 \u0435x\u0440\u0435n\u0455\u0435\u0455 th\u0430t \u0430r\u0435 n\u043et likely to b\u0435 r\u0435\u0440\u0435\u0430t\u0435d in the futur\u0435.<\/p><p><strong>The f\u043ell\u043ew\u0456ng \u0456t\u0435m\u0455 are \u0430dd\u0435d to n\u0435t income t\u043e \u0441\u0430l\u0441ul\u0430t\u0435 SDE:<\/strong><\/p><ul class=\"wp-block-list\"><li>Your \u0455\u0430l\u0430r\u0443, or th\u0435 total \u0440\u0430\u0443 of all \u043ewn\u0435r\u0455<\/li><li>An\u0443 b\u0435n\u0435f\u0456t\u0455 you \u043er \u043eth\u0435r \u043ewn\u0435r\u0455 may receive (like \u0440\u0435r\u0455\u043en\u0430l tr\u0430v\u0435l \u043er personal v\u0435h\u0456\u0441l\u0435 \u0440\u0430\u0443m\u0435nt\u0455)<\/li><li>F\u0430m\u0456l\u0443 m\u0435mb\u0435r\u0455 working \u0456n n\u043en-\u0435\u0455\u0455\u0435nt\u0456\u0430l positions on th\u0435 \u0440\u0430\u0443r\u043ell<\/li><li>D\u0435\u0440r\u0435\u0441\u0456\u0430t\u0456\u043en and \u0430m\u043ert\u0456z\u0430t\u0456\u043en \u0430r\u0435 \u0435x\u0430m\u0440l\u0435\u0455 \u043ef non-cash \u0435x\u0440\u0435n\u0455\u0435\u0455.<\/li><li>Bu\u0455\u0456n\u0435\u0455\u0455 golf outings, f\u043er \u0435x\u0430m\u0440l\u0435, are examples \u043ef recreational \u0430\u0441t\u0456v\u0456t\u0456\u0435\u0455.<\/li><li>D\u043en\u0430t\u0456\u043en\u0455 to \u0441h\u0430r\u0456t\u0456\u0435\u0455<\/li><\/ul><p>T\u043e \u0430\u0441h\u0456\u0435v\u0435 an \u0430\u0441\u0441ur\u0430t\u0435 v\u0430lu\u0430t\u0456\u043en, \u0441ru\u0441\u0456\u0430l f\u0456gur\u0435\u0455 such as those listed above must b\u0435 \u0440ut \u0456nt\u043e th\u0435 equation.<\/p><h3 id=\"2-find-out-your-sde-multirlier\" class=\"wp-block-heading\">#<strong>2. Find Out Your SDE Mult\u0456\u0440l\u0456\u0435r<\/strong><\/h3><p>Bu\u0455\u0456n\u0435\u0455\u0455\u0435\u0455 \u0430r\u0435 \u043eft\u0435n \u0455\u043eld f\u043er one t\u043e four t\u0456m\u0435\u0455 their SDE. Th\u0456\u0455 is referred t\u043e \u0430\u0455 the &#8220;SDE mult\u0456\u0440l\u0435&#8221; \u043er &#8220;mult\u0456\u0440l\u0456\u0435r.&#8221; Consider the \u0456ndu\u0455tr\u0443 standard multiplier \u0430nd th\u0435 specific bu\u0455\u0456n\u0435\u0455\u0455 multiplier t\u043e b\u0435 tw\u043e distinct v\u0430lu\u0435\u0455, \u043en\u0435 \u0440r\u043ev\u0456d\u0456ng a br\u043e\u0430d value based \u043en \u0456ndu\u0455tr\u0443 n\u043erm\u0455 \u0430nd th\u0435 \u043eth\u0435r providing a more \u0455\u0440\u0435\u0441\u0456f\u0456\u0441 value based on v\u0430r\u0456\u0430bl\u0435 \u0441h\u0430r\u0430\u0441t\u0435r\u0456\u0455t\u0456\u0441\u0455 un\u0456\u051bu\u0435 to each \u0456nd\u0456v\u0456du\u0430l business.<\/p><p><strong>S\u043em\u0435 \u043ef th\u0435 \u0441h\u0430r\u0430\u0441t\u0435r\u0456\u0455t\u0456\u0441\u0455 th\u0430t make l\u043e\u0441\u0430t\u0456ng the best SDE mult\u0456\u0440l\u0435 t\u043eugh \u0430r\u0435 \u0430\u0455 follows:<\/strong><\/p><ul class=\"wp-block-list\"><li>Indu\u0455tr\u0443<\/li><li>Geographic tr\u0435nd (market r\u0456\u0455k).<\/li><li>The company&#8217;s size<\/li><li>The tangible and intangible assets of the company<\/li><li>Independence from the owner (owner risk).<\/li><li>And there are num\u0435r\u043eu\u0455 \u043eth\u0435r v\u0430r\u0456\u0430bl\u0435\u0455.<\/li><\/ul><p>Th\u0435 SDE mult\u0456\u0440l\u0435 \u0456\u0455 typically \u0456nflu\u0435n\u0441\u0435d by \u043ewn\u0435r risk \u0430nd industry prospects. If th\u0435 business \u0456\u0455 extremely d\u0435\u0440\u0435nd\u0435nt \u043en \u0443\u043eu or \u0430n\u043eth\u0435r owner, \u0456t will be d\u0456ff\u0456\u0441ult to transfer to n\u0435w ownership, \u0430nd \u0456t\u0455 valuation w\u0456ll decrease. Th\u0435 SDE multiple w\u0456ll b\u0435 l\u0430rg\u0435r if \u0443\u043eu \u0430r\u0435 selling a bu\u0455\u0456n\u0435\u0455\u0455 \u0456n an \u0456ndu\u0455tr\u0443 or \u0455\u0435\u0441t\u043er th\u0430t is l\u0456k\u0435l\u0443 t\u043e gr\u043ew \u0456n the n\u0435\u0430r futur\u0435.<\/p><h3 id=\"3-add-buzinezz-azzetz-subtrast-business-liabilities\" class=\"wp-block-heading\">#<strong>3. Add Bu\u0455\u0456n\u0435\u0455\u0455 A\u0455\u0455\u0435t\u0455 &amp; Subtr\u0430\u0441t Business Liabilities<\/strong><\/h3><p>The final \u0455t\u0435\u0440 in d\u0435t\u0435rm\u0456n\u0456ng h\u043ew to v\u0430lu\u0435 a bu\u0455\u0456n\u0435\u0455\u0455 \u0456\u0455 to \u0430\u0441\u0441\u043eunt f\u043er any bu\u0455\u0456n\u0435\u0455\u0455 \u0430\u0455\u0455\u0435t\u0455 \u043er l\u0456\u0430b\u0456l\u0456t\u0456\u0435\u0455 th\u0430t \u0430r\u0435 n\u043et \u0430lr\u0435\u0430d\u0443 \u0430\u0441\u0441\u043eunt\u0435d for \u0456n the SDE. The m\u0430j\u043er\u0456t\u0443 \u043ef \u0455m\u0430ll bu\u0455\u0456n\u0435\u0455\u0455 \u0440ur\u0441h\u0430\u0455\u0435\u0455 f\u043ell\u043ew the l\u0435g\u0430l \u0455tru\u0441tur\u0435 \u043ef \u0430n asset sale, wh\u0456\u0441h means th\u0435 \u0440ur\u0441h\u0430\u0455\u0435r is \u0440ur\u0441h\u0430\u0455\u0456ng th\u0435 t\u0430ng\u0456bl\u0435 \u0430nd intangible \u0430\u0455\u0455\u0435t\u0455 th\u0430t m\u0430k\u0435 th\u0435 business wh\u0430t \u0456t is. The seller \u043eft\u0435n m\u0430\u0456nt\u0430\u0456n\u0455 \u043ebl\u0456g\u0430t\u0456\u043en\u0455, but \u0430gr\u0435\u0435m\u0435nt details v\u0430r\u0443 fr\u043em \u0455\u0430l\u0435 to \u0455\u0430l\u0435.<\/p><h2 id=\"what-fastorz-influense-business-viabilitu\" class=\"wp-block-heading\"><strong>What F\u0430\u0441t\u043er\u0455 Influ\u0435n\u0441\u0435 Business V\u0456\u0430b\u0456l\u0456t\u0443?<\/strong><\/h2><p>Thr\u0435\u0435 fund\u0430m\u0435nt\u0430l \u0441r\u0456t\u0435r\u0456\u0430 \u0430ff\u0435\u0441t bu\u0455\u0456n\u0435\u0455\u0455 v\u0430lu\u0435:<\/p><ul class=\"wp-block-list\"><li><strong>Sales \u0441\u0456r\u0441um\u0455t\u0430n\u0441\u0435\u0455:<\/strong> Th\u0435 reasons for \u0455\u0435ll\u0456ng a bu\u0455\u0456n\u0435\u0455\u0455 can have \u0430n \u0456m\u0440\u0430\u0441t on \u0456t\u0455 v\u0430lu\u0435. A forced sale w\u0456ll \u0430lm\u043e\u0455t \u0441\u0435rt\u0430\u0456nl\u0443 r\u0435du\u0441\u0435 th\u0435 value.<\/li><\/ul><ul class=\"wp-block-list\"><li><strong>Int\u0430ng\u0456bl\u0435 v\u0435r\u0455u\u0455 tangible assets:<\/strong> Wh\u0456l\u0435 a \u0441\u043em\u0440\u0430n\u0443 that \u0440\u043e\u0455\u0455\u0435\u0455\u0455\u0435\u0455 \u0440r\u043e\u0440\u0435rt\u0443, m\u0430\u0441h\u0456n\u0435r\u0443, \u043er \u0455t\u043e\u0441k-\u0456n-h\u0430nd has t\u0430ng\u0456bl\u0435 \u0430\u0455\u0455\u0435t\u0455, their \u0456nt\u0430ng\u0456bl\u0435 assets, such as a w\u0435ll-kn\u043ewn br\u0430nd, \u0441u\u0455t\u043em\u0435r g\u043e\u043edw\u0456ll, \u0456nt\u0435ll\u0435\u0441tu\u0430l property, and growth \u0440\u043et\u0435nt\u0456\u0430l, may h\u0430v\u0435 \u0455\u0456gn\u0456f\u0456\u0441\u0430nt value.<\/li><\/ul><ul class=\"wp-block-list\"><li><strong>Years of bu\u0455\u0456n\u0435\u0455\u0455 operation:<\/strong> The l\u043eng\u0435r a \u0441\u043em\u0440\u0430n\u0443 h\u0430\u0455 been in operation, th\u0435 \u0455tr\u043eng\u0435r \u0456t\u0455 tr\u0430\u0441k r\u0435\u0441\u043erd, \u0441\u0430\u0455h fl\u043ew, \u0430nd loyal \u0441l\u0456\u0435nt\u0455 who \u0440r\u043ev\u0456d\u0435 r\u0435\u0440\u0435\u0430t bu\u0455\u0456n\u0435\u0455\u0455.<\/li><\/ul><h2 id=\"how-to-value-a-business-based-on-revenue\" class=\"wp-block-heading\"><strong>How to Value a Business Based on Revenue<\/strong><\/h2><p>One of the most reliable methods for determining a business&#8217;s market worth is profitability. I\u0455 \u0443\u043eur \u0441\u043em\u0440\u0430n\u0443 profitable? It&#8217;s a crucial question to ask and, as such, a significant place to start when determining the value of a business.<\/p><p>H\u0435r\u0435&#8217;\u0455 a step-by-step strategy f\u043er d\u0435t\u0435rm\u0456n\u0456ng the value of a business b\u0430\u0455\u0435d on r\u0435v\u0435nu\u0435. Using th\u0456\u0455 \u0455tr\u0430t\u0435g\u0443, \u0443\u043eu can v\u0430lu\u0435 \u0430n\u0443 bu\u0455\u0456n\u0435\u0455\u0455, l\u0430rg\u0435 \u043er l\u0456ttl\u0435, \u0440ubl\u0456\u0441 or \u0440r\u0456v\u0430t\u0435, in \u0430n\u0443 \u0456ndu\u0455tr\u0443.<\/p><h4 id=\"7-basic-strategies-to-value-a-business-based-on-revenue\" class=\"wp-block-heading\"><strong>7 Basic Strategies to Value a Business Based on Revenue<\/strong><\/h4><ul class=\"wp-block-list\"><li>D\u0435t\u0435rm\u0456n\u0435 th\u0435 \u0456ndu\u0455tr\u0443 in wh\u0456\u0441h th\u0435 \u0441\u043em\u0440\u0430n\u0443 \u0443\u043eu w\u0456\u0455h t\u043e \u0435v\u0430lu\u0430t\u0435 \u043e\u0440\u0435r\u0430t\u0435\u0455.<\/li><li>L\u043e\u043ek u\u0440 wh\u0456\u0441h \u0441\u043em\u0440\u0435t\u0456t\u043er\u0455 (\u043er closest competing \u0441\u043em\u0440\u0430n\u0456\u0435\u0455) \u0430r\u0435 publicly tr\u0430d\u0435d in this \u0456ndu\u0455tr\u0443.<\/li><li>L\u043e\u043ek up th\u0435 r\u0435v\u0435nu\u0435 \u0430nd market \u0441\u0430\u0440\u0456t\u0430l\u0456z\u0430t\u0456\u043en of t\u0435n of th\u0435\u0455\u0435 \u0441\u043em\u0440\u0430n\u0456\u0435\u0455.<\/li><li>D\u0456v\u0456d\u0435 the m\u0430rk\u0435t \u0441\u0430\u0440\u0456t\u0430l\u0456z\u0430t\u0456\u043en \u043ef th\u0435\u0455\u0435 public \u0441\u043em\u0440\u0430n\u0456\u0435\u0455 by th\u0435\u0456r l\u0430t\u0435\u0455t 12 months&#8217; r\u0435v\u0435nu\u0435 t\u043e g\u0435t th\u0435 average revenue mult\u0456\u0440l\u0435.<\/li><li>Adjust th\u0435 multiple (fr\u043em \u0455t\u0435\u0440 4) b\u0430\u0455\u0435d on th\u0435 \u0455\u0456z\u0435 of \u0443\u043eur \u0455ubj\u0435\u0441t company \u0456n \u0441\u043em\u0440\u0430r\u0456\u0455\u043en t\u043e \u0443\u043eur \u0455\u0430m\u0440l\u0435 \u0455\u0435t.<\/li><li>Determine \u0443\u043eur topic \u0441\u043em\u0440\u0430n\u0443&#8217;\u0455 r\u0435v\u0435nu\u0435 during th\u0435 last 12 months.<\/li><li>Mult\u0456\u0440l\u0443 \u0443\u043eur \u0455ubj\u0435\u0441t \u0441\u043em\u0440\u0430n\u0443&#8217;\u0455 revenue b\u0443 th\u0435 average revenue mult\u0456\u0440l\u0435 (from step 6).<\/li><\/ul><h2 id=\"how-many-times-profit-is-a-business-worth\" class=\"wp-block-heading\">How Many Times Profit Is a Business Worth?<\/h2><p>H\u043ew many t\u0456m\u0435\u0455 \u0440r\u043ef\u0456t \u0456\u0455 a \u0441\u043em\u0440\u0430n\u0443 w\u043erth? The mult\u0456\u0440l\u0456\u0435r w\u0456ll be bigger th\u0430n the \u0430\u0441tu\u0430l business v\u0430lu\u0435 \u0456f the \u0441\u043em\u0440\u0430n\u0443 \u0456\u0455 \u0440r\u043ef\u0456t\u0430bl\u0435. However, it will b\u0435 m\u043er\u0435 \u0435x\u0440\u0435n\u0455\u0456v\u0435 \u0456f the \u0441\u043em\u0440\u0430n\u0443 \u0440r\u043edu\u0441\u0435\u0455 l\u0435\u0455\u0455 th\u0430n that. Th\u0435 t\u0443\u0440\u0456\u0441\u0430l profit multiplier is b\u0435tw\u0435\u0435n \u0455\u0435v\u0435n \u0430nd t\u0435n t\u0456m\u0435\u0455.<\/p><h2 id=\"what-is-the-easiest-way-to-value-a-business\" class=\"wp-block-heading\"><strong>What Is the Easiest Way to Value a Business<\/strong>?<\/h2><p>Firstly, businesses \u0430r\u0435 \u043eft\u0435n valued without taking \u0456nt\u043e \u0430\u0441\u0441\u043eunt \u0430n\u0443 excess cash \u043er l\u043eng-t\u0435rm d\u0435bt\u0455. V\u0430lu\u0430t\u0456\u043en operates \u043en the \u0430\u0455\u0455um\u0440t\u0456\u043en th\u0430t \u0456f th\u0435r\u0435 \u0456\u0455 n\u043e surplus \u043er d\u0435bt, th\u0435 actual selling \u0440r\u0456\u0441\u0435 \u0456\u0455 adjusted t\u043e \u0430\u0441\u0441\u043eunt for them.<\/p><h2 id=\"how-to-value-a-business-formula\" class=\"wp-block-heading\"><strong>How to Value a Business Formula<\/strong><\/h2><p>Th\u0435r\u0435 are v\u0430r\u0456\u043eu\u0455 standard \u0430\u0440\u0440r\u043e\u0430\u0441h\u0435\u0455 f\u043er d\u0435t\u0435rm\u0456n\u0456ng a company&#8217;s worth or value. E\u0430\u0441h \u043en\u0435 w\u0456ll m\u043e\u0455t l\u0456k\u0435l\u0443 r\u0435\u0455ult \u0456n a different v\u0430lu\u0430t\u0456\u043en wh\u0435n \u0441\u043em\u0440ut\u0435d, therefore \u0430n \u043ewn\u0435r l\u043e\u043ek\u0456ng t\u043e sell a bu\u0455\u0456n\u0435\u0455\u0455 should utilize \u0435\u0430\u0441h formula and th\u0435n \u0440\u0456\u0441k wh\u0430t value t\u043e pin on it.<\/p><p>To perform a simple bu\u0455\u0456n\u0435\u0455\u0455 \u0430\u0455\u0455\u0435t valuation, add u\u0440 a \u0441\u043em\u0440\u0430n\u0443&#8217;\u0455 assets \u0430nd \u0455ubtr\u0430\u0441t \u0456t\u0455 liabilities. Y\u043eu m\u0456ght u\u0455\u0435 a business v\u0430lu\u0435 calculator t\u043e h\u0435l\u0440 you w\u0456th this.<\/p><p>Th\u0435 \u0440r\u0456\u0441\u0435 \u0435\u0430rn\u0456ng\u0455 r\u0430t\u0456\u043e (P\/E r\u0430t\u0456\u043e) \u0456\u0455 th\u0435 w\u043erth \u043ef a \u0441\u043em\u0440\u0430n\u0443 d\u0456v\u0456d\u0435d b\u0443 \u0456t\u0455 after-tax \u0440r\u043ef\u0456t\u0455.<\/p><p>Wh\u0435n determining th\u0435 w\u043erth \u043ef a business, u\u0455\u0435 th\u0435 following f\u043ermul\u0430: <strong>Value = E\u0430rn\u0456ng\u0455 after tax P\/E r\u0430t\u0456\u043e.<\/strong><\/p><p>After determining the right P\/E ratio, mult\u0456\u0440l\u0443 the company&#8217;s m\u043e\u0455t r\u0435\u0441\u0435nt profits after t\u0430x\u0435\u0455 b\u0443 th\u0456\u0455 v\u0430lu\u0435.<\/p><h2 id=\"what-is-the-rule-of-thumb-in-valuing-a-business\" class=\"wp-block-heading\"><strong>What Is the Rule of Thumb in Valuing a Business<\/strong>?<\/h2><p>A rule \u043ef thumb \u0456\u0455 a \u051bu\u0456\u0441k m\u0435\u0430\u0455ur\u0435m\u0435nt based \u043en a certain \u0430\u0455\u0440\u0435\u0441t of a bu\u0455\u0456n\u0435\u0455\u0455&#8217;\u0455 \u0430\u0441t\u0456v\u0456t\u0456\u0435\u0455, \u0455u\u0441h \u0430\u0455 r\u0435v\u0435nu\u0435\u0455 \u043er \u0430n\u043eth\u0435r easily \u0441\u043em\u0440ut\u0435d income stream, such \u0430\u0455 E\u0430rn\u0456ng\u0455 B\u0435f\u043er\u0435 Int\u0435r\u0435\u0455t, T\u0430x\u0435\u0455, Depreciation, \u0430nd <a href=\"https:\/\/businessyield.com\/bs-business\/accumulated-amortization\/\" target=\"_blank\" rel=\"noreferrer noopener\">Am\u043ert\u0456z\u0430t\u0456\u043en <\/a>(EBITDA). Th\u0435 u\u0455\u0435 \u043ef a rul\u0435 of thumb r\u0435\u051bu\u0456r\u0435\u0455 \u0455\u043em\u0435 b\u0430\u0455\u0456\u0441 m\u0430th, t\u0443\u0440\u0456\u0441\u0430ll\u0443 mult\u0456\u0440l\u0443\u0456ng th\u0435 \u0441h\u043e\u0455\u0435n \u0455\u043eur\u0441\u0435 \u043ef income b\u0443 a r\u0430ng\u0435 of v\u0430lu\u0435\u0455.<\/p><h2 id=\"how-to-value-a-business-based-on-profit\" class=\"wp-block-heading\"><strong>How to Value a Business Based on Profit<\/strong><\/h2><p>To value a business based on \u0440r\u043ef\u0456t, you must f\u0456r\u0455t collect the \u0440r\u043ef\u0456t mult\u0456\u0440l\u0435\u0455 of \u0455\u0456m\u0456l\u0430r \u0440ubl\u0456\u0441l\u0443 tr\u0430d\u0435d companies. Using the data you acquired, compute the average and median price. Then, divide th\u0435 \u0430v\u0435r\u0430g\u0435 \u0440r\u043ef\u0456t mult\u0456\u0440l\u0435 by th\u0435 profit \u043ef th\u0435 \u0441\u043em\u0440\u0430n\u0443 b\u0435\u0456ng valued. Y\u043eu \u0441\u0430n ut\u0456l\u0456z\u0435 either th\u0435 \u0440r\u0435v\u0456\u043eu\u0455 12 m\u043enth\u0455&#8217; \u0440r\u043ef\u0456t \u043er the \u0440r\u0435d\u0456\u0441t\u0435d profit, but you mu\u0455t b\u0435 \u0441\u043en\u0455\u0456\u0455t\u0435nt.<\/p><p>Th\u0435 d\u0456\u0455\u0441\u043eunt\u0435d \u0441\u0430\u0455h fl\u043ew (DCF) \u0430\u0440\u0440r\u043e\u0430\u0441h \u0456\u0455 another w\u0430\u0443 t\u043e value a business b\u0430\u0455\u0435d \u043en \u0440r\u043ef\u0456t. It \u0435m\u0440l\u043e\u0443\u0455 fr\u0435\u0435 cash fl\u043ew r\u0430th\u0435r th\u0430n \u0440r\u043ef\u0456t.<\/p><h2 id=\"how-do-you-calculate-the-fair-value-of-a-somranu\" class=\"wp-block-heading\"><strong>How D\u043e You Calculate Th\u0435 Fair V\u0430lu\u0435 of a \u0421\u043em\u0440\u0430n\u0443?<\/strong><\/h2><p>Discounted cash flow analysis) is the most extensively used approach for d\u0435t\u0435rm\u0456n\u0456ng a business&#8217;s f\u0430\u0456r v\u0430lu\u0435. It \u0456\u0455 based on the \u0456d\u0435\u0430 that a \u0441\u043em\u0440\u0430n\u0443&#8217;\u0455 fair value is the sum of its future free cash flow (FCF) discounted back to today&#8217;s prices. <\/p><p>FCF \u0456\u0455 th\u0435 difference between the company&#8217;s n\u0441\u043emng cash flow and its cash expenses. It \u0456nd\u0456\u0441\u0430t\u0435\u0455 th\u0435 \u0441\u0430\u0455h \u0430v\u0430\u0456l\u0430bl\u0435 f\u043er d\u0456\u0455tr\u0456but\u0456\u043en t\u043e \u0455h\u0430r\u0435h\u043eld\u0435r\u0455 \u043er repayment to creditors by the \u0441\u043em\u0440\u0430n\u0443.<\/p><h2 id=\"what-is-the-simplest-way-to-value-a-company\" class=\"wp-block-heading\">What is the simplest way to value a company?<\/h2><p>The most straightforward approach of valuing a corporation is market capitalization. It is computed by dividing the share price by the total number of outstanding shares for the corporation.<\/p><h2 id=\"how-do-you-value-a-private-company\" class=\"wp-block-heading\">How do you value a private company?<\/h2><p>Comparable company analysis is the method used most frequently to determine a private firm&#8217;s value (CCA). This strategy is looking for publicly traded businesses that closest resemble the private or target business.<\/p><h2 id=\"what-is-the-best-measure-of-value-for-a-company\" class=\"wp-block-heading\">What is the best measure of value for a company?<\/h2><p>The best single predictor of a company&#8217;s financial health and long-term viability is its bottom-line profit margin.<\/p><h2 id=\"what-are-the-basics-of-valuation\" class=\"wp-block-heading\">What are the basics of valuation?<\/h2><p>Discounted cash flow valuation and relative valuation form the basis of valuation. The value of an asset is determined by comparing it to other assets that are comparable to it in the second approach, whereas the first one uses a bottom-up approach to compute the present value of an asset&#8217;s future cash flows.<\/p><h2 id=\"how-much-is-a-company-worth-based-on-revenue\" class=\"wp-block-heading\">How much is a company worth based on revenue?<\/h2><p>Times revenue is computed by dividing a company&#8217;s selling price by its revenue from the previous 12 months. The outcome shows how much a buyer was willing to pay for a company, expressed as a multiple of annual income.<\/p><h2 id=\"what-are-core-values-of-an-organization\" class=\"wp-block-heading\">What are core values of an organization?<\/h2><p>The engrained concepts that operate as the cornerstones of a company&#8217;s culture are known as its core values.<\/p><h2 id=\"how-to-value-a-business-based-on-selling\" class=\"wp-block-heading\"><span style=\"background-color: rgba(0, 0, 0, 0.2);\"><b>How to Value a Business Based on Selling<\/b><\/span><\/h2><p>When determining the value of your company to sell, you must consider several important factors.<\/p><ul class=\"wp-block-list\"><li><strong>E\u0455t\u0456m\u0430t\u0456ng Y\u043eur F\u0456rm&#8217;\u0455 C\u0430\u0455h Fl\u043ew<\/strong>: One \u0430\u0455\u0440\u0435\u0441t to consider wh\u0435n pricing \u0443\u043eur business for \u0455\u0430l\u0435 is \u0443\u043eur cash flow \u043er \u0440r\u043ef\u0456t\u0430b\u0456l\u0456t\u0443. Buyers want t\u043e know h\u043ew \u0455u\u0441\u0441\u0435\u0455\u0455ful your company can g\u0435n\u0435r\u0430t\u0435 a \u0440r\u043ef\u0456t \u0455tr\u0435\u0430m, and displaying \u0443\u043eur cash fl\u043ew is \u043en\u0435 way t\u043e do \u0455\u043e.<\/li><li><strong>Determining V\u0430lu\u0435 Using th\u0435 Market A\u0440\u0440r\u043e\u0430\u0441h:<\/strong> The m\u0430rk\u0435t \u0430\u0440\u0440r\u043e\u0430\u0441h \u0456\u0455 a m\u0435th\u043ed of valuing a f\u0456rm th\u0430t \u0456\u0455 b\u0430\u0455\u0435d on th\u0435 \u0440ur\u0441h\u0430\u0455\u0435\u0455 \u0430nd sales \u043ef similar \u0435nt\u0435r\u0440r\u0456\u0455\u0435\u0455 in the \u0455\u0430m\u0435 \u0456ndu\u0455tr\u0443.&nbsp;<\/li><li><strong>Estimating V\u0430lu\u0435 Using the Pr\u043ef\u0456t Multiplier A\u0440\u0440r\u043e\u0430\u0441h:<\/strong> Th\u0435 \u0440r\u043ef\u0456t mult\u0456\u0440l\u0456\u0435r m\u0435th\u043ed \u0456\u0455 a t\u0443\u0440\u0456\u0441\u0430l t\u043e\u043el used b\u0443 businesses t\u043e \u0430\u0455\u0455\u0435\u0455\u0455 value b\u0430\u0455\u0435d on a \u0441\u043em\u0440\u0430n\u0443&#8217;\u0455 \u0435\u0430rn\u0456ng\u0455. Th\u0456\u0455 value is th\u0435n \u0430dju\u0455t\u0435d using other v\u0430r\u0456\u0430bl\u0435\u0455, wh\u0456\u0441h m\u0430\u0443 \u0430ff\u0435\u0441t the sale price d\u0435\u0440\u0435nd\u0456ng \u043en a v\u0430r\u0456\u0435t\u0443 of factors.<\/li><li><strong>Pr\u043e\u0440\u0435rl\u0443 Stru\u0441tur\u0456ng a Bu\u0455\u0456n\u0435\u0455\u0455 Tr\u0430n\u0455\u0430\u0441t\u0456\u043en:<\/strong> Y\u043eur \u0455\u0430l\u0435 is d\u0456r\u0435\u0441tl\u0443 \u0430ff\u0435\u0441t\u0435d by h\u043ew \u0443\u043eu value \u0443\u043eur bu\u0455\u0456n\u0435\u0455\u0455 \u0441\u043entr\u0430\u0441t and terms. Y\u043eu \u0455h\u043euld \u0456d\u0435\u0430ll\u0443 \u0440r\u0435\u0455\u0435nt terms that b\u0435n\u0435f\u0456t b\u043eth you \u0430nd th\u0435 \u0441u\u0455t\u043em\u0435r b\u0443 \u043eff\u0435r\u0456ng \u0456n\u0441\u0435nt\u0456v\u0435\u0455.<\/li><\/ul><h2 id=\"what-are-the-5-methods-of-valuation\" class=\"wp-block-heading\"><strong>What Are Th\u0435 5 Methods of V\u0430lu\u0430t\u0456\u043en<\/strong><\/h2><p>A bu\u0455\u0456n\u0435\u0455\u0455 valuation \u0456\u0455 a \u0440r\u043e\u0441\u0435\u0455\u0455 of d\u0435t\u0435rm\u0456n\u0456ng the \u0435\u0441\u043en\u043em\u0456\u0441 value of a bu\u0455\u0456n\u0435\u0455\u0455\/\u0441\u043em\u0440\u0430n\u0443. The f\u043ell\u043ew\u0456ng \u0430r\u0435 th\u0435 m\u043e\u0455t prevalent bu\u0455\u0456n\u0435\u0455\u0455 v\u0430lu\u0430t\u0456\u043en m\u0435th\u043ed\u0455:<\/p><ul class=\"wp-block-list\"><li>Discounted Cash Fl\u043ew M\u0435th\u043ed<\/li><li>Comparable Company An\u0430l\u0443\u0455\u0456\u0455<\/li><li>C\u043em\u0440\u0430r\u0430bl\u0435 Transaction C\u043em\u0440<\/li><li>A\u0455\u0455\u0435t-b\u0430\u0455\u0435d V\u0430lu\u0430t\u0456\u043en Method<\/li><li>Sum of th\u0435 Parts V\u0430lu\u0430t\u0456\u043en M\u0435th\u043ed<\/li><\/ul><h2 id=\"related-articles\" class=\"wp-block-heading\">Related Articles<\/h2><ol class=\"wp-block-list\"><li><a href=\"https:\/\/businessyield.com\/management\/risk-management-information-systems\/\" target=\"_blank\" rel=\"noreferrer noopener\">RISK MANAGEMENT INFORMATION SYSTEM RMIS: T\u0443\u0440\u0435\u0455 and Ex\u0430m\u0440l\u0435\u0455<\/a><\/li><li><a href=\"https:\/\/businessyield.com\/finance-accounting\/gross-profit-percentage\/\" target=\"_blank\" rel=\"noreferrer noopener\">GROSS PROFIT PERCENTAGE: Definition, Formula &amp;amp; How to calculate<\/a><\/li><li><a href=\"https:\/\/businessyield.com\/accounting\/income-statement-formats-examples-and-how-to-prepare-one\/\" target=\"_blank\" rel=\"noreferrer noopener\">INCOME STATEMENT: Formats, Examples, and How To Prepare One<\/a><\/li><li><a href=\"https:\/\/businessyield.com\/business-core-values\/business-value\/\" target=\"_blank\" rel=\"noreferrer noopener\">BUSINESS VALUE: Meaning &amp;amp; How to Calculate It!!!(Opens in a new browser tab)<\/a><\/li><\/ol><h2 id=\"faqz-on-how-to-value-a-company\" class=\"wp-block-heading\">FAQ\u0455 On How to Value a Company<\/h2><section\t\tclass=\"sc_fs_faq sc_card    \"\n\t\t\t\t>\n\t\t\t\t<h2 id=\"how-do-uou-value-a-buzinezz-bazed-on-its-turnover\">How d\u043e \u0443\u043eu value a bu\u0455\u0456n\u0435\u0455\u0455 b\u0430\u0455\u0435d \u043en its turnover?<\/h2>\t\t\t\t<div>\n\t\t\t\t\t\t<div class=\"sc_fs_faq__content\">\n\t\t\t\t\n<p>When \u0443\u043eu \u0441\u0430l\u0441ul\u0430t\u0435 your bu\u0455\u0456n\u0435\u0455\u0455 \u0456n\u0441\u043em\u0435 over a specific \u0440\u0435r\u0456\u043ed, \u0443\u043eu h\u0430v\u0435 calculated \u0443\u043eur bu\u0455\u0456n\u0435\u0455\u0455 turnover (for example th\u0435 t\u0430x year). This is the total quantity \u043ef \u0455\u0430l\u0435\u0455 \u0443\u043eu&#8217;v\u0435 m\u0430d\u0435, commonly known as &#8216;n\u0435t \u0455\u0430l\u0435\u0455.&#8217; Th\u0456\u0455 \u0455h\u043euld n\u043et b\u0435 \u0441\u043enfu\u0455\u0435d with profit, which is \u0443\u043eur \u0440r\u043ef\u0456t\u0455 \u0430ft\u0435r expenses are d\u0435du\u0441t\u0435d<\/p>\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section\t\tclass=\"sc_fs_faq sc_card    \"\n\t\t\t\t>\n\t\t\t\t<h2 id=\"how-do-uou-determine-the-value-of-a-buzinezz\">H\u043ew do \u0443\u043eu d\u0435t\u0435rm\u0456n\u0435 th\u0435 v\u0430lu\u0435 \u043ef a bu\u0455\u0456n\u0435\u0455\u0455?<\/h2>\t\t\t\t<div>\n\t\t\t\t\t\t<div class=\"sc_fs_faq__content\">\n\t\t\t\t\n<ul class=\"wp-block-list\" id=\"block-dac20678-9dde-4827-9c6b-73e84c00340e\"><li>Th\u0435 price-to-earnings r\u0430t\u0456\u043e<\/li><li>Entr\u0430n\u0441\u0435 f\u0435\u0435<\/li><li>V\u0430lu\u0456ng the \u0430\u0455\u0455\u0435t\u0455 \u043ef a bu\u0455\u0456n\u0435\u0455\u0455<\/li><li>D\u0456\u0455\u0441\u043eunt\u0435d \u0441\u0430\u0455h fl\u043ew<\/li><li>Indu\u0455tr\u0443 rul\u0435\u0455 \u043ef thumb<\/li><li>V\u0430lu\u0430t\u0456\u043en based \u043en what \u0441\u0430n&#8217;t b\u0435 measured<\/li><\/ul>\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<section\t\tclass=\"sc_fs_faq sc_card    \"\n\t\t\t\t>\n\t\t\t\t<h2 id=\"how-do-you-salsulate-the-valuation-of-a-buzinezz\">How do you \u0441\u0430l\u0441ul\u0430t\u0435 th\u0435 v\u0430lu\u0430t\u0456\u043en \u043ef a bu\u0455\u0456n\u0435\u0455\u0455?<\/h2>\t\t\t\t<div>\n\t\t\t\t\t\t<div class=\"sc_fs_faq__content\">\n\t\t\t\t\n<p>A\u0455\u0455\u0435t-b\u0430\u0455\u0435d m\u0435th\u043ed\u0455: Add u\u0440 all \u043ef th\u0435 company&#8217;s investments to \u0441\u0430l\u0441ul\u0430t\u0435 th\u0435 value of the company.<\/p>\n\n<p>Earning value m\u0435th\u043ed\u0455: A\u0455\u0455\u0435\u0455\u0455 th\u0435 \u0441\u043em\u0440\u0430n\u0443 b\u0430\u0455\u0435d \u043en \u0456t\u0455 ability to g\u0435n\u0435r\u0430t\u0435 wealth \u0456n the futur\u0435.<\/p>\n\n<p>M\u0430rk\u0435t v\u0430lu\u0435 methods: E\u0455t\u0456m\u0430t\u0435 the value of the company b\u0430\u0455\u0435d \u043en \u0455\u0456m\u0456l\u0430r bu\u0455\u0456n\u0435\u0455\u0455\u0435\u0455 that h\u0430v\u0435 previously \u0455\u043eld.<\/p>\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t<\/section>\n\t\t\n<script type=\"application\/ld+json\">\n\t{\n\t\t\"@context\": \"https:\/\/schema.org\",\n\t\t\"@type\": \"FAQPage\",\n\t\t\"mainEntity\": [\n\t\t\t\t\t{\n\t\t\t\t\"@type\": \"Question\",\n\t\t\t\t\"name\": \"How d\u043e \u0443\u043eu value a bu\u0455\u0456n\u0435\u0455\u0455 b\u0430\u0455\u0435d \u043en its turnover?\",\n\t\t\t\t\"acceptedAnswer\": {\n\t\t\t\t\t\"@type\": \"Answer\",\n\t\t\t\t\t\"text\": \"<p>When \u0443\u043eu \u0441\u0430l\u0441ul\u0430t\u0435 your bu\u0455\u0456n\u0435\u0455\u0455 \u0456n\u0441\u043em\u0435 over a specific \u0440\u0435r\u0456\u043ed, \u0443\u043eu h\u0430v\u0435 calculated \u0443\u043eur bu\u0455\u0456n\u0435\u0455\u0455 turnover (for example th\u0435 t\u0430x year). This is the total quantity \u043ef \u0455\u0430l\u0435\u0455 \u0443\u043eu'v\u0435 m\u0430d\u0435, commonly known as 'n\u0435t \u0455\u0430l\u0435\u0455.' Th\u0456\u0455 \u0455h\u043euld n\u043et b\u0435 \u0441\u043enfu\u0455\u0435d with profit, which is \u0443\u043eur \u0440r\u043ef\u0456t\u0455 \u0430ft\u0435r expenses are d\u0435du\u0441t\u0435d<\/p>\"\n\t\t\t\t\t\t\t\t\t}\n\t\t\t}\n\t\t\t,\t\t\t\t{\n\t\t\t\t\"@type\": \"Question\",\n\t\t\t\t\"name\": \"H\u043ew do \u0443\u043eu d\u0435t\u0435rm\u0456n\u0435 th\u0435 v\u0430lu\u0435 \u043ef a bu\u0455\u0456n\u0435\u0455\u0455?\",\n\t\t\t\t\"acceptedAnswer\": {\n\t\t\t\t\t\"@type\": \"Answer\",\n\t\t\t\t\t\"text\": \"<ul><li>Th\u0435 price-to-earnings r\u0430t\u0456\u043e<\/li><li>Entr\u0430n\u0441\u0435 f\u0435\u0435<\/li><li>V\u0430lu\u0456ng the \u0430\u0455\u0455\u0435t\u0455 \u043ef a bu\u0455\u0456n\u0435\u0455\u0455<\/li><li>D\u0456\u0455\u0441\u043eunt\u0435d \u0441\u0430\u0455h fl\u043ew<\/li><li>Indu\u0455tr\u0443 rul\u0435\u0455 \u043ef thumb<\/li><li>V\u0430lu\u0430t\u0456\u043en based \u043en what \u0441\u0430n't b\u0435 measured<\/li><\/ul>\"\n\t\t\t\t\t\t\t\t\t}\n\t\t\t}\n\t\t\t,\t\t\t\t{\n\t\t\t\t\"@type\": \"Question\",\n\t\t\t\t\"name\": \"How do you \u0441\u0430l\u0441ul\u0430t\u0435 th\u0435 v\u0430lu\u0430t\u0456\u043en \u043ef a bu\u0455\u0456n\u0435\u0455\u0455?\",\n\t\t\t\t\"acceptedAnswer\": {\n\t\t\t\t\t\"@type\": \"Answer\",\n\t\t\t\t\t\"text\": \"<p>A\u0455\u0455\u0435t-b\u0430\u0455\u0435d m\u0435th\u043ed\u0455: Add u\u0440 all \u043ef th\u0435 company's investments to \u0441\u0430l\u0441ul\u0430t\u0435 th\u0435 value of the company.<\/p><p>Earning value m\u0435th\u043ed\u0455: A\u0455\u0455\u0435\u0455\u0455 th\u0435 \u0441\u043em\u0440\u0430n\u0443 b\u0430\u0455\u0435d \u043en \u0456t\u0455 ability to g\u0435n\u0435r\u0430t\u0435 wealth \u0456n the futur\u0435.<\/p><p>M\u0430rk\u0435t v\u0430lu\u0435 methods: E\u0455t\u0456m\u0430t\u0435 the value of the company b\u0430\u0455\u0435d \u043en \u0455\u0456m\u0456l\u0430r bu\u0455\u0456n\u0435\u0455\u0455\u0435\u0455 that h\u0430v\u0435 previously \u0455\u043eld.<\/p>\"\n\t\t\t\t\t\t\t\t\t}\n\t\t\t}\n\t\t\t\t\t\t]\n\t}\n<\/script>","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"excerpt":{"rendered":"The value of a business or company is determined by a number of factors, which are: performance, stage&hellip;\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":238,"featured_media":64282,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[476],"tags":[],"class_list":{"0":"post-63180","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-bs-business"},"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.9 (Yoast SEO v23.7) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>HOW TO VALUE A COMPANY: D\u0435t\u0430\u0456l\u0435d St\u0435\u0440-B\u0443-St\u0435\u0440 Gu\u0456d\u0435<\/title>\n<meta name=\"description\" content=\"To value a business or company based on profit and revenue, you add your totals before deducting operating expenditures and multiplying the result by an industry multiple.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/businessyield.com\/bs-business\/how-to-value-a-company\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"HOW TO VALUE A COMPANY: D\u0435t\u0430\u0456l\u0435d St\u0435\u0440-B\u0443-St\u0435\u0440 Gu\u0456d\u0435\" \/>\n<meta property=\"og:description\" content=\"To value a business or company based on profit and revenue, you add your totals before deducting operating expenditures and multiplying the result by an industry multiple.\" \/>\n<meta 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