Knowing the worth of your business can help you decide how to evaluate a business worth if you should invest in new equipment, find a partner or secure investment funds. It can also serve as an idea of how your financials are doing, and can be helpful in comparing your company’s performance to other companies in your industry.

One way to evaluate a business worth is to tally up the value of assets, including inventory and property, then subtract any debts or liabilities. This method could be an ideal starting point however, it is important to remember that your business is more than its assets and liabilities.

For a more accurate valuation one can consider the market method which is based upon the prices similar businesses have sold for. This method utilizes seller’s discretionary earnings, also known as SDE. It is similar to EBITDA but it includes things like charitable donations and employee outings.

A multiple of annual sales can be used to assess revenue. The multiplier can differ depending on the market and trends, and an experienced business adviser or broker can help you determine what is suitable for your particular company. No matter which method you choose, it’s important to update your calculations regularly and consult with an expert business appraiser for the most accurate representation of your company’s worth. They can also help you prepare for a potential purchase or sale of your company.