Put a figure on it: How to understand the true value of your business

Perhaps you’re considering selling your business and wondering how much you may be able to sell for, or maybe you have committed to selling your business and need to establish a value as part of the process.

Either way, valuing your business is a useful exercise for business owners and an essential part of the selling process.

While it’s important to get a formal valuation of your business, if you’re looking for an indication of what your business might be worth, try our handy valuation tool to get an idea of where you stand.

Understanding the value of your business is essential

It may sound obvious, but understanding what your business is worth is a critical part of the business selling process.

Even before you begin the process of selling your business, valuing your company is vital.

You may have certain cash requirements to pursue whatever it is you want to do next. If your business isn’t worth enough, you may need to hold off selling it until it is.

Read more: 5 simple things that can increase the value of your business

Once the selling process begins, having an accurate valuation gives you a strong starting point for negotiations. It will ensure you don’t get lowballed (which often happens with DIY sellers) and will give you the confidence to fight for what you know your business is worth.

Many factors can affect the value of your business

Once you do establish a value for your business, be wary that many factors can affect a valuation, and they can be very fluid figures.

Speaking to the Financial Times, Paul Morrish of Succession Wealth listed several factors that can increase the value of a business:

• Proven profitability
• Good underlying and ongoing growth
• Strong client and staff retention
• A clear client proposition
• An excellent risk and compliance record.

Often, the amount a business sells for depends on the buyer. For example, if they’re a small business their offer may be limited by resources. Alternatively, if your business offers them a strategic advantage they may offer above your valuation.

Get in touch

Remember, for a quick indication of your business’ worth, try our valuation calculator on the Melo website. If you think you’re ready for a more formal valuation, we can help you find the right person for the job.

Get in touch by emailing hello@melo.co.uk or call 0113 4656 111.