I have asked myself this question for the very first time about 2 years past, when a Private Equity Fund asked for a meeting and e-mailed me and my associate. They needed to understand our cost and were interested in purchasing our company. My first reaction: panic!
"How much should we inquire?"
"What if it is too much and they laugh at us?"
"What if it is too little and they still laugh at us? "
"How much is our company really worth?"
I turned to my next best friend in demand, Google, since not one of my friends or family members understood anything about M&A or Business Valuation.
Myself searched all nighttime key word phrases like "business value", "measure business value", "business valuation" etc. and read lots of posts on the topic. At the close of the day, myself still had not found what I was searching for: the magic mathematics formula which would show my business value. Several formulas had been discovered by me however, and my friends gave results to me.
Okay, that is an improvement (myself think), but which worth is the one that is correct? Should myself ask for $350,000 or $35,000?
Well, time passed by and, if a person asks myself now how they are able to quantify their business value, I can declare with great wisdom: "it depends!" :D . Myself am aware of, I also despised that reply but sadly, it is the correct one. Measuring how much a company is worth cannot be done with a formula that is simple, it takes into consideration many standards:
- the team supporting the organization. Without an excellent direction as well as an excellent team, net profit, profit margin or annual revenue are only amount, with no actual worth.