Insights + Resources

Business Valuation Approaches

Mar 4, 2020

In the third quarter of 2019, more than 2,400 small businesses were sold. The median sale price was roughly $278,000, up 3.3% from 2018.1 All Business Valuation models are different. How should you value yours?

As a business owner, ascertaining the value of your business is essential for a variety of reasons, including business succession, estate tax estimates, or qualifying for a loan.

There are several valuation techniques, ranging from the simple to the very complex. Outlined below are three different approaches to valuing a business.

Comparable-Company Analysis. One approach to determine the value of your business is to use a comparable-company analysis. Look at the numbers for a business that is similar to yours in industry, size, and growth. By using the metrics from one or more companies that are most like yours, you can create a ballpark estimate as to the value of your business.

EBITDA Model. Using your business data is another method to help put a price tag on your enterprise. Using the EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) model can give a more detailed picture of your financials. EBITDA takes the business debt into account, which can be an important factor when considering selling your business. Your business may be more attractive to potential buyers if all the assets aren’t already leveraged against existing debt.2

Asset-Based Valuation. The asset-based valuation method calculates the value of all tangible and intangible assets held by the business. This approach ignores the future earnings potential of the company. Thus, a pure asset-based valuation model is often used for companies that are bankrupt or looking to liquidate.3

The economy and other factors in the market may also determine the saleability of your business. Before moving forward with a business valuation, consider working with legal and tax professionals who are familiar with the process. Also, a qualified business appraiser may be able to offer some valuable insight. Ask us at Epic Capital for a recommended business appraiser today.

Tags: , , , ,

More Insights

Market Update – Tariffs Bring April Showers
Apr 4, 2025

April showers came a month early as stocks fell in March. Tariffs were the primary cause of the market jitters, although that uncertainty became too much for markets to shrug off once economic data started to weaken.

Six Keys to Investing
Apr 2, 2025

A successful investor maximizes gain and minimizes loss. Though there can be no guarantee that any investment strategy will be successful and all investing involves risk, including the possible loss of principal, here are six basic principles that may help you invest more successfully.

Organizing Your Finances When Your Spouse Has Passed
Mar 31, 2025

Losing a spouse is a stressful transition. And the added pressure of having to settle the estate and organize finances can be overwhelming. Fortunately, there are steps you can take to make dealing with these matters less difficult.

Retirement and Adult Children
Mar 28, 2025

Families are one of the great joys in life, and part of the love you show to your family is making sure that their basic needs are met. While that’s only to be expected from birth through the high school years, many households are helping their adult children well into their twenties and beyond at … Continue reading “Retirement and Adult Children”

Life Insurance and Charitable Giving
Mar 26, 2025

Life insurance can be an excellent tool for charitable giving. Not only does life insurance allow you to make a substantial gift to charity at relatively little cost to you, but you may also benefit from tax rules that apply to gifts of life insurance.

Insights + Resources >