It is always good when you own a business to calculate the value of the business. Not only when you want to sell the business is this interesting. In general, it is a good exercise to go through the process of valuing the business to see how the business is doing and where any improvements can be made. Calculating the value of a business can be made as complex as you want it to be, but in order to arrive at an objective result and determine the most realistic value possible, there is some work involved. There are several companies and agencies that specialise in company takeovers and sales and also offer a platform for this. In most cases, these kinds of companies can also help calculate the business value.
Rules of thumb can help calculate a value
If you want to determine the value of an online business for sale quickly and relatively easily, you can quickly arrive at an amount using a number of rules of thumb. The results differ for each rule of thumb, of course, but you can always add parts to it that will help you get to an increasingly close approximation of the final value. There are people who mainly look at the intrinsic value of the company, especially its equity and all its assets. This is of course good to take into account, but is really a snapshot in time and also indicates very little about the future prospects of a company and is therefore not fully representative.
EDITBA is a commonly used indicator when calculating enterprise value
One aspect that is widely used when valuing a business is the so-called EDITBA. EDITBA is an abbreviation that stands for earnings before interest, taxes, depreciation and mortisation, which loosely translated means as much as; earnings before interest, taxes, depreciation and amortisation. EDITBA x 4 is a way of getting an indication of the value of the company. Other rules of thumb regularly used are; Net profit x 5 or 2x net profit + 1 x net asset value. Various business sales platforms and consultants can help figure out the best formula and exact valuation.