When valuing a business, there are many ways to calculate the worth of the business. One thing is for certain, you must take into account not only those tangible assets that can be boxed up and counted but also those intangible assets that you may overlook.
Typically, business owners value only tangible, identifiable items:
- Physical plant – buildings and property, etc.
- Physical supplies – the pens, pencils, nuts and bolts that can counted and valued
- Tangible assets – money in the bank, outstanding loans, stocks, etc.
- Fixed assets – machinery, computers, furniture and vehicles
Qualitative instead of quantitative assets can hold far more value for the business owner. This includes:
- A business model with potential industry, market and environment for the future, instead of the only the proven track record of the business
- Quality and price point of the product or service
- Proven systems and processes
In order to properly value a business, all assets, tangible and otherwise, need to be taken into consideration. It is wise for any business, whether preparing for sale or just starting out; to be mindful of all the assets that drives the value of their business and how they do that.