What's Your Company Worth?
Whether you're selling your business, getting insurance or sorting through estate taxes, knowing your business's value comes in handy.
Valuing a business is always an imprecise science, even with large-cap public companies. For example, is the value of a large public company based on its market price? Its book value? Its potential worth if broken into parts that have more perceived value than the whole? The answer is, there are many ways to determine the value of a company. Perhaps the best way to understand the value of any business, large or small, is to look at who's doing the valuing and for what purpose. For example, we'll wager that you would value your family business differently for estate purposes vs. a sale of the business. This is why in many instances, more than one value can be correct.
Regardless of how a business is valued, there are both quantitative and qualitative factors that play a role in a comprehensive appraisal. Many of the elements that go into a business valuation can be classified in three categories:
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