putting a dollar value on your buisness

[imwllc]

if you basically know what the physical assets are worth, how do you value the rest? want to know incase i ever want to sell

thanks

[NC Cams]

That is a nightmare, as in figuring what the "intellectual properties" are worth, with or without the "business" (ergo the support system such as customer base, name, good will, etc).

One formula is involves a multiple of the sales for a year's business for "the business" which doesn't include the assets or patents or "intellectual properties".

Example: when Chrysler bought AMC, they dumped everything but Jeep because that was the only thing "worth" anything. When Daimler bought Chrysler, the same thing only different occurred....

However, the Coke franchise would be worthless without the formula so therein lies the rub - what's the formula "worth" because everything else (bottling equipment) is generic and worth market and/or scrap value on a take over.

If you're selling buggy whips, probably not a lot.

If you're going to buy Coke, the formula is the franchise....

This is where a good lawyer experienced in the selling/transferral of businesses is worth investing in....

[HuFlungDung]

IF it's any kind of business at all, someone will easily give you a dollar for it, so I'd go a bit higher, cause you can always come down

[ViperTX]

Well the best way to find out....is find a business (publically traded) that has sold recently....divide the sales price by their annual revenues and you will have an idea of the ratio (sales price to revenue). Take the ratio and multiply times the annual revenue and you have a 'sales price'.....the market will determine if it is indeed worth that amount.

What you have to watch out for is when alot of the sales price is counted as "goodwill"....which basically means the name or reputation is suppose to be worth something, but I look at it as a 'business with an overinflated value."

One thing I look at when considering a business to purchase is their net profit.....can the net profit pay the expenses associated with financing the purchase price, while still allowing enough cash to grow the business.