This can be an existential question or a business owner's dilemma. I come across it often when business owners look for advice on how to raise capital and don't know how much to give to those who invest in or buy their company.
So, how does one calculate one's worth? The concept of Valuation in business circles can range from the simplest conversation to the most complex financial models. Ultimately, whatever a Buyer is willing to pay a Seller is the true Value. That of course, assumes that all potential Buyers know the opportunity is available. Otherwise, the one Buyer who does the deal may just be getting a bargain or even overpaying since there is no one else in the deal to validate the purchase price.
Many deals are ultimately done with the "back of the envelope" method. These can be summary multiples of Gross Revenue used in simple math to calculate a company's value. Such multiples are readily researched for most industries making the calculation fast and easy. They only provide a point of negotiation. There is no absolute answer on business value. Worth repeating: What a willing buyer pays is the true value. What Buyer and Seller agree upon is the correct price on any deal, the correct worth at any point in time.
So, how does one calculate one's worth? The concept of Valuation in business circles can range from the simplest conversation to the most complex financial models. Ultimately, whatever a Buyer is willing to pay a Seller is the true Value. That of course, assumes that all potential Buyers know the opportunity is available. Otherwise, the one Buyer who does the deal may just be getting a bargain or even overpaying since there is no one else in the deal to validate the purchase price.
Many deals are ultimately done with the "back of the envelope" method. These can be summary multiples of Gross Revenue used in simple math to calculate a company's value. Such multiples are readily researched for most industries making the calculation fast and easy. They only provide a point of negotiation. There is no absolute answer on business value. Worth repeating: What a willing buyer pays is the true value. What Buyer and Seller agree upon is the correct price on any deal, the correct worth at any point in time.
