Properly Assessing Your Business Value

Following are some value stages of small business:
 
1. An extremely well-established and steady business with a rock-solid market position, whose continued earnings will not be dependent upon a strong management team.
A multiple of eight to ten times current profits  
2. An established business with a good market position, with some competitive pressures and some swings in earnings, requiring continual management attention.
A multiple of five to seven times current profits  
3. An established business with no significant competitive advantages, stiff competition, few hard assets, and heavy dependency upon management’s skills for success.
A multiple of two to four times current profits  
4. A small personal service business where the new owner will be the only, or one of the only, professional service providers.
A multiple of one times current profits.  
 
Every business owner’s goal should be to get to Stage 1.  Only then can you let the business run on its own, with or without your daily input.  Chances are that your business is in one of these four stages right now.  If you are in 2-4, your value in the business is still very high, as it would likely collapse without your daily involvement.  As you progress toward Stage 1, each operation within your business will reach a level of autonomy that allows you to concentrate on future plans, expansion, and strategy to continue to grow the business.