You’ve put your hours, your savings, and your soul into your business. Surely, you think, my business is worth something?
But calculating a company’s valuation is not as straightforward as it sounds. There are multiple factors to consider, as well as different valuation methods.
Knowing how much your company is worth is incredibly important as it will impact your strategic decisions moving forward. While it’s clearly important to know the dollar amount associated with your business’ value if you want to sell it, its also useful if you need to apply for a business loan or attract investors.
DOLLARS AND CENTS
Determining a public company’s valuation is pretty easy: share price multiplied by outstanding shares. This figure represents the company’s market capitalisation.
On the other hand, determining the value of a private company is much less straightforward. Since they’re not required to disclose numbers, there tends to be some degree of guesswork involved. The valuation can sometimes go wrong – see WeWork’s fall from a US$47 billion valuation to bankruptcy in a matter of weeks.
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