Calculating the Value of Your Business

Calculating the Value of Your Business. In Blackboard Fridays Episode 76, Jacob talks about Valuation. Need this implemented into your business? Talk to the international business advisor who can do exactly that – Contact Jacob, Learn More, or Subscribe for Updates.

Who is Jacob Aldridge, Business Coach?

“The smart and quirky advisor who gets sh!t done in business.” Back independent since 2019.

Since April 2006, I’ve been an international business advisor providing bespoke solutions for privately-owned businesses with 12-96 employees.

At this stage you have proven your business model, but you’re struggling to turn aspirations into day-to-day reality. You are still responsible for all 28 areas of your business, but you don’t have the time or budget to hire 28 different experts.

You need 1 person you can trust who can show you how everything in your business is connected, and which areas to prioritise first.

That’s me.

Learn more here. Or Let’s chat.

Transcript

Hi I’m Matt Noller, Director of businessDEPOT Broking. Today, we’re going to talk about business value and how it is calculated. You may remember from episode 24 of Blackboard Fridays, Jacob spoke about business valuation drivers. And also, making sure that you know what you want or need at your business value in the future.

Today, I’m going to talk about the specific drivers that you used to calculate business value. Just quickly, the business value calculation here is Risk by Return. Essentially, there are many methods of how to calculate business value. Always give the analogy, you put 10 accountants in the room they’re going to do it 10 different ways.

However, no matter the method that’s used to calculate business value, it’s always going to come down to the risk of the business and the return or the profit that the business makes. Quite simply, the return is always given as a return on investment amount I always use a percentage return on investment. However, with different accountants or different business values, you may have heard the term called multiplier.

Essentially, in the same it is exactly the same thing but given in a different value. The return figure is essentially the profit or return on investment dollar-wise of the business. Link together the profit multiplied by the risk of the business is going to essentially give you the business value.

Given the business small business or medium business in general is a much more riskier investment than a lot of others the return on investment that you’ll need from a business will normally need to be at least a 30 percent return. So given the risk of small business, 30 percent return by the profit of a given business will give you the value that the business will end up being.

However, given that the risks of businesses, small business in general, are very wide, this figure here may go right down and over a 100% return on investment. Each business needs to be considered on a case-by-case basis as both figures can take a lot to be calculated. Essentially, when it comes down to it and looking at business value, the attention is all in the detail of how this figure has been calculated and how this figure has been calculated.

The return or adjusted profit for a given business, given the key operational income and expenses of it and the risks are solely associated with it. If you’d like to know more about how to calculate your business value in more detail and specific to your industry or business, please feel free to give me a call.

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