How does one calculate a net worth (a number that says for how much can a 100% share in a company be sold for) of a small to medium sized company (100k - 5 million yearly revenue)?
I know that there are many factors included in this (such as its uniqueness on the market, growth potential, etc.), but talking only from the economical point (based on the companys revenue, profit, debt, etc.)?
Please give me some basic ways to calculate it.
Ill also give you an example to calculate:
My friend has a company based in middle Europe, he has his own brand under which he imports (80% of his product range) and manufactures (20% of his product range) various organic food and organic eco cosmetics. He sells his products in various retailers across Europe (he sells it directly to them - not through a distributor, so there is no middle man), his total revenue in the last year was 1,3 million EUR and his profit was 154k EUR (36% growth in revenue since the last year, 60% growth in profit since the last year).
He is 100% owner of the company, has 12 employees and he founded the company 6 years ago.
Thanks.
Market Capitalization is the Base of all the Discounted Future Cashflows.
Beyond that People often ask for Premium on top of that.
But most people use fast little ratios. Annual Margin/Price= Capitalization Rate.
You define your desired Cap Rate.
Some businesses aren't Price on Net rates but Gross Rates. Typically the Gross Revenue Multiplier is used.
There is a standard for each business type.
http://www.businessesforsale.com/search/import-and-export-businesses-for-sale
looks like imports go for 2.5x-3x Net or .8x-1.2x gross
>>1306065
I am quite confused by your post, but you say that "imports go for 2.5x - 3x Net or .8x - 1.2x gross" - does this mean that I should calculate the price of his business like this:
either
a.) "gross" (his yearly revenue multiplied by .8 - 1.2) = 1,04 million EUR - 1,56 million EUR
b.) "net" (his yearly profit multiplied by 2.5x - 3x) = 385k EUR - 462k EUR
Correct? Or am I missing something?
>36% growth in revenue since the last year, 60% growth in profit since the last year
You basically cant tell, honestly. The growths are far too wild to make any reliable estimations for the next few years.
>>1305959
you're looking for a "valuation method".
and sorry... there are many many many methods out there...
ideally you'll have to estimate the future cash flow of your enterprise by adding some growth metrics for receipts, costs and every other stuff..
then you'll have to make a monte carlo simulation to make it statistically more relevant.
then you'll calculate the discounted cash flow using the values that you've forecasted
tl;dr useful link: http://www.wikinvest.com/wiki/Valuation_Methods
Thank you for the replies guys, however, can you actually calculate the net worth of the company that I presented in my original post?
>>1306733
bump
>>1308088
trump
>>1306733
yeah, it's about three fiddy
>>1308473
thanks for the bump
Ebitda multiples. If it's a sme and your buying a controlling interest. Then don't you feel like the future growth belongs to you? I fucking wouldn't pay someone for shit I'm going to do in the future. Don't use npv for this type of investment.
>>1306733
I'd pay 5x ebitda. Cosmetics is a shit industry and I don't like orangic bullshit. Need to look at the balance sheet. It's could be worth jackshit.
what equity you have vs debt.. Fucking idiot /thread
>>1305959
Funny thing is there are many ways to calculate how much a business is worth (and thus its equity), the most obvious being a multiplication of your yearly numbers (e.g. 10x annual revenue for tech unicorns, but obviously this doesn't happen often).
The unicorns have the numbers because there' is/was a lot of cash out there (lots of opportunities to exit). Just be sensible and use prudence when calculating it and you'll be fine.
Mind me asking why you want to calculate this? Is someone offering to buy your company, or is this for bragging rights?
>>1309313
He's asking how to value the equity in the first place. Get off /biz/ and never come back
>>1309329
Do you know how to value a distribution business like OP's?
If not fuckoff
anyone else a little pissed off every time on shark tank they value EVERY idea the same way? total ask price divided by equity %?
>>1310621
Lowqualitybait.jpeg
