As business owners we all value our businesses highly, however not every business owner can put a cash value on their business. This is because valuing a business is not as simple as it sounds. Even the great investor Warren Buffet described as much of an art as it is a science.
The average small business in the UK is worth around £90,000 on average although there are regional disparities where businesses located in the South of England are worth more. If you are fortunate enough to run a small business in London it may be worth more than £160,000.
If you are looking for a formula to value your business the most popular way is to look at the price to earnings ratio. This is the business value divided by its post-tax profits. Within this you will need to factor in whether your business profits are increasing each year or if the opposite is true and it has mounting liabilities. Both these factors will impact on the true value of your business.
You should then look at the future prospects for your business. Is it likely to be a high growth business or one that just ticks along consistently? A high growth business is likely to be more tempting for anyone seeking to invest for example. Having an experienced investor involved will also add further value if they have a strong track record in your industry.