Nick Chernih
Nick Chernih, Founder at LinkBuildSEO

Selling a business

How do I calculate how much my business is worth?

I'm kinda of curious as what to my business is worth, I'm not at a point yet where I want to hire an experienced business valuation professional, I'm just curious to see if it is worth selling.

Does anyone have any tips on some things I can do to get an idea of how much my business is worth?

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2 Answers

David Solomon

David Solomon , Business Performance Strategist at Quiddity

Good answer Phil. The thing I'd add to that is that your business will be worth much more if you are not in it! By that I mean that if the business relies on you then the purchaser of the business really needs to buy you as well - or at least some of your time. You want to make yourself redundant through effective systems, training etc. You can still work in the business if you want to of course.

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Phil Khor

Phil Khor , Founder at SavvySME

Hey Nick, 


Great question. I think as business owners we often wonder about our business valuation but perhaps never get around to ask it.


I'm neither a qualified business valuer nor have extensive experience in this field, but I can talk to some of my personal experience and give you some ideas. In fact, I just went through a similar process involving a family business.


I used a combination of 3 methods below - initially as a back of the envelop exercise, then refine it iteratively: 


1) income based - i.e. earnings such as EBITDA and cashflow calculations


2) asset based - asset values, liabilities, liquidation costs, etc. I'd argue that you should consider both tangible and intangible assets, such as IP, brand recognition i.e. assets that have net positive effect on the business long term


3) market based - basically what the market is prepare to pay, based on comparing of recent sales of similar companies. For instance, sifting through sites like realcommercial.com.au or domainbusiness.com.au gave me a ballpark idea.


I reckon business valuation is a combination of science and art. The methods I used above is merely a guide, but you will find that there are lots of intricacies in applying these methods. What I found is that different assumptions will easily throw your calculations off a tangent. This is where a good professional business valuer can really help with bringing the art of applying these and other methods based on their experience. What I found critical too is a good business broker who knows the market inside out, and knows how to market your business accordingly.


At the end of the day, you need to be confident that the right combination of techniques and experience are used reasonably to valuate your business when you're ready to sell.


Hope this helps.

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