Do you know the real value of your business?

They often say that your business and your brand is worth what somebody is prepared to pay for it. But whether you are interested in selling your business at some point in the future, or you are trying to get investors on board now, it’s important to know the real value of the business you are building. So how do you calculate the actual value of your business? Hiring a professional appraiser is an obvious first step, but as a basic guide there are three methods used to assign value. Firstly, the asset based method looks at what it would cost to replace all the assets in the business and assigning a value to that cost. Secondly, the market based method compares other similar businesses in your sector or area to determine a value. Thirdly, the income based method evaluates pretax and after-tax earnings or uses another income metric such as gross sales, plus the value of the tangible assets and future growth prospects. It sounds complicated, but it is a good way of tracking the growth and value of the business you are building.