How Do You Value a Small Business?

Fewer employees, fewer departments, a clearer asset and cost structure. These are just some of the points that make valuing a small business simpler and less complex. Nevertheless, there are a few points to consider.

Transferability

Is the company dependent on the current owner in all respects? It would significantly reduce the value if it is uncertain whether a new owner can achieve a similar result.

Financial Valuation

Gather financial documents: Obtain all relevant financial documents, including profit and loss statements, balance sheets, and cash flow statements for the last 3-5 years.

Clean up financial data: Identify extraordinary or non-recurring income and expenses and correct them to obtain an adjusted financial picture of your company.

Valuation of intangible assets: Consider intellectual property, customer relationships, and brand value, which can have a significant impact on the company value.

Market and Growth Prospects

Future growth potential: Think about the long-term growth potential of your company and how it can affect the company value.

Analyze market position: How do you compare to your competitors?

Risk Analysis

Identification of risk factors: Identify potential risks that could affect your company, such as legal matters, competitive pressure, or dependence on key customers or suppliers.

Select Valuation Method

The multiplier method and the Income Approach are often best suited for small businesses. They are intuitive, easy to use, and provide an initial value.

Comparison with similar companies: Find comparison data for similar companies in your industry and region to check your company value. Use the NIMBO company valuation to see where your company stands compared to similar companies.