It doesn’t matter whether you started your business or purchased it. Set a goal to grow and increase its value. And know how to value your business for sale. Because this plays a critically important role in your business finances.
So get the best price possible when you sell your business. But also know the value of your business while running it. Because this gives you more control of your finances. And based on the value of your business, you can get loans to buy equipment, inventory, and branch out to new locations.
The past couple of years have seen exceptionally good conditions for buying and selling businesses. And according to BizBuySell, 2018 marked a record for buying and selling a small business. Higher business valuations, increased cash flow. And higher asking and selling prices drove this growth.
So How Much is your Business Really Worth?
Believe it or not, you won’t find a right or wrong way to work out how much a business is worth. So experts use loads of different valuation methods. And the number those calculations come up with will vary greatly. Because it depends upon the criteria set forth.
That being said, if you know exactly what it is you value in a business, it’s not hard to work out a ballpark figure. After all, nobody in their right mind would pay for an existing business without knowing what it’s worth.
To help you get started, here are some of the Web’s top free business valuation calculators.
10 Business Valuation Calculators
1. CalcXML
CalcXML has been providing a wide range of financial tools to small businesses for a while now. And the company’s valuation calculator is a tried-and-tested model.
It’s a simple tool designed to give potential buyers a quick snapshot. It takes all of the basics into consideration, including: annual earnings, excess compensation and level of business risk. Best of all, it only takes a few minutes.
2. EquityNet
EquityNet is one of the globe’s leading pioneers in crowdfunding. Established in 2005, the platform works to connect thousands of entrepreneurs with investors of all shapes and size — and has already helped start-ups across the globe raise hundreds of millions in equity, debt and royalty-based capital.
As part of that mission, EquityNet provides a valuation calculator backed by real market data gathered from over 3,000 business across North America. That enables you to weigh the value of a business against potential competitors — which is a factor some analysts often overlook.
EquitNet also provides free calculators to work out a company’s profit margin, cash flow and startup risk.
3. ExitAdviser
ExitAdviser is an online support service that enables business owners to connect with potential buyers. In line with that service, ExitAdviser plays home to an extremely quick business valuation calculator designed to give potential buyers quick quotes.
To get an estimate, buyers simply need to enter net profit from a company’s most recent financial year and forecast its sales growth. That said, there are plenty of more advanced input options to help generate more accurate valuations.
4. BizEx
Like most free valuation calculators, BizEx hosts a platform based upon the ‘Multiple of Earnings’ method. But their calculator is far more advanced than most of the free models you’ll find kicking about on other sites.
By including an in-depth breakdown of a company’s discretionary and multiple earnings, you’re able to create instant valuation ranges depending upon a range of variables. Afterwards, you’re given the option to talk these numbers over with a broker if you’re so inclined.
5. Digital Exits
Finding the most accurate value of your business requires going through a lot of data. Digital Exits has analyzed 82 different industries to give business owners a more accurate estimate for what you can expect to earn, based on their specific business.
The data the company provides will give you a better understanding of where your business sits so you can better gauge the market.
6. Hadley Capital
Hadley Capital’s business valuation calculator is slightly different, in that it applies a multiple of EBITDA to determine the Enterprise Value of your business. In general, a small business will usually trade for around three or four times its normalized EBITDA. That said, the multiple will slide dramatically based upon a variety of characteristics specific to your business.
This calculator understandably places particular emphasis on your annual EBITDA, annual capital expenditures and how much of your revenue comes from top customers.
7.
The American River Bank business valuation calculator uses the discounted cash flow method to determine the value of the business.
According to the bank, this method is more relevant because future operating conditions and cash flows are variable or not projected.
8. MassMutual Financial Group
MassMutual is an all-encompassing insurance provider that represents over 13 million clients across the globe. Consequently, the company values user experience far more than some of the industry’s smaller websites. Its business value calculator is no exception.
This user-friendly calculator very clearly and concisely walks you through every step of the valuation process in order to work out a decent estimate in as little as two minutes.
9. HelpSME
HelpSME is a great resource for small businesses in need of tutorials and advice. That’s why the site offers an easy-to-use valuation calculator using the Net Present Value (NPV) method. This approach uses a company’s future cash flows to try and work out how much it’s worth in the here and now.
HelpSME’s calculator also includes useful guides designed to help you wrap your head around the value provided.
10. National Life
National Life is an all-encompassing collective of financial services companies, and its online valuation calculator draws upon that power in order to generate fairly well-informed market estimates.
Similar to HelpSME, National Life’s calculator finds the worth of a company by looking at the present value of its expected future earnings. It places particular consideration on a company’s lack of marketability and excess compensation.
In the same way that no two valuations are alike, it’s crucial to bear in mind that this list is by no means exhaustive. There are loads of brilliant valuation calculators online that you can use in order to generate a snapshot of how much a business may be worth.
Just remember: these free business valuation calculators aren’t always accurate. At the end of the day, it’s up to you to do your homework in order to ensure you’ve put in (or accepted) the best possible offer for an existing company.
Calculator Photo via Shutterstock
While these are useful, I hope that we don’t get to use it if it will mean that we have to sell our businesses out of desperation. I know that some people do this so they can go into another venture but selling a business that you have poured your heart and soul into is just quite sad for me.
Could these companies handle valuations of international companies?
Yes, our back-office valuations team provides custom valuation reports for companies with any location or scope.
Armin
ExitAdviser.com
There is another company offering business valuation based on estimated earnings. They are called LaunchScore dot com and they cover hundreds of business types in hundreds of U.S. cities. What sets them apart is that they estimate the potential yearly earning of a business…so you can get a valuation without detailed knowledge of the financials.
I appreciate you posting a list of all of these business valuation calculators. I will definitely make use of them. However, is it also a good idea to pay for a business valuation? I figure that investors and potential buyers would trust those valuations more than free online versions.
Thanks for the interesting sites to help calculate business valuation! It’s nice to know that there’s no right and wrong way to work out how much a business is worth. I’d be sure to try these links out and see if they’d bring interesting results. Just to be sure, I’ll get myself a business valuation firm to confirm if the calculations are correct or lacking. If I were a business owner, this would be an awesome help.
Without measuring the relevant factors these above calculators are about as accurate as averaging the cost of shopping carts full of food as they go through the till for a day and then saying the next day every shopping cart going through will pay that same price regardless of what is there.
NOT ACCURATE AND COULD NOT POSSIBLY BE ACCURATE.
I am a CPPA and I wrote a book; “25 FACTORS AFFECTING BUSINESS VALUATION”
The valuations I do are certainly not free but they are accurate and I do about 50 a year from many sectors of the economy. Business values range from $200,000 to 20 Million in value.
Google the book name.