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How to Calculate The Worth of Your Business

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The simplest and the most basic economics has defined an entrepreneur as one who combines all the other three factors of production (land, labour and capital) and makes sure that these gets run effectively in a bid to make profits. From this definition, it can be seen that the end game of being an entrepreneur is to get your reward – the profits –from the business in the first place and this being said, every business is expected to be successful and profitable with the right entrepreneurship skills. 

Now, it would not be out of place for you to know how much your business is worth, and there are a variety of reasons why this would be necessary and needed. For one, you might be looking to sell your business in the future and would need a rough estimate of the asking price, or you just want to check how prosperous you have been and how the expenditure compares with the profits. Any which way, we present to you these sure-fire path to take when estimating the worth of your business.

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        1.Taking inventory
You cannot estimate what your business is really worth if you do not take into consideration the materials that have been purchased to keep it running in the first place. Take inventory of all your assets that have been directed at making the business a success – the equipment, the furniture, the machinery and any other of such related properties. You should take into consideration the fat that there would have been depreciation on the values of these materials and with the market inflation in mind, you would be able to estimate what the whole business is truly worth.

       2. Advertise your business.
Seeing your own business from your own eyes might be a deceiving way to get the real worth and value but another pair of third party eyes would do that for you.  Advertise your business to investors and other entrepreneurs and list it for sale, only for a while. Check the quotes you have received from potential buyers and see how far they are willing to go to acquire your business. That would be a great indicator of how much its worth in the first place.

        3. Assets valuation
Another thing you can do is estimate the total value of the assets that you have into running the business. While this can be done by yourself, you might want to get professional help because there are hidden points of calculation that you might not know about and then end up missing the mark of what the true worth of that enterprise is.

        4. Projection and calculations
Even after knowing the value and worth of your assets, you would still need to calculate the ability of the business to make sales and generate profits over a given time frame (from already available data, of course). Businesses that can expand faster than others are usually priced higher than those that would need a lot of time or investment to start blooming more.
        5. Get Professional Help

All of the above are do it yourself tutorials but should you feel that you don’t have the necessary skills for this kind of evaluation scale, you should get the help of professionals who would do a great job for you and at a good fee too.