Value My Business: How to Gauge the Health of Your Business
Every business owner is proud to say “I own my own business”. However, there are times when the hours and the pressure really can be overwhelming, especially when it seems like every dollar you get has to go to pay bills. It gets scary sometimes when the money goes out as fast, or faster, than it comes in, and if you’ve gotten a loan, or other bills are due, you really wonder just exactly how healthy your business is, let alone how to answer the question “What is the best way to value my business?”
Some people feel that the best way to value their business is to see how satisfied their customers are. And, on the whole, that isn’t a bad yardstick to use. When you’re in a business that’s designed to help people, many times it really doesn’t matter if you’re making a profit or not. All that matters is that you’ve helped someone. That gives you one way to answer the “value my business” question.
Other times, the only way to value the business is by the bottom line. Accounts payable balanced against accounts receivable. If that gets too far out of balance, especially when you’ve got more payables than receivables, then you may be headed for trouble. It doesn’t do to count on something happening that may not, especially if you’re building ahead of a big contract that never materializes. That has spelled doom for more than one company. As an answer to “value my business”, that is yet another yardstick to use.
As a small business owner, about the only way you can tell if you’ve got a successful business is if you’re able to make a living doing it. If you can, then you’re doing better than about ninety percent of all the start-ups out there. And the only way you can really value your business is to see what it would cost to replace everything you’ve got, plus how much money you’re making. If you’re in the market to sell your business, between the replacement cost of all the materials and equipment plus money generated for5 years is the rule of thumb.
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