How Do I Know How Much My Illinois Business is Worth?

 Posted on August 25, 2022 in DuPage County Business Law Attorney

As any business owner can tell you, running a business means constantly having a lot on your plate. From paying employees to making sure contracts get completed on time, to running inventory and making helpful community connections, the life of a business owner rarely involves downtime. In the hustle and bustle of everyday commerce, it can be easy to lose track of exactly how much a business is worth. How do you know your business’s worth, anyway? Will it depend on who you ask and which method of valuation you use? An Illinois business law attorney can help you answer these questions while ensuring that you have the legal representation you need.

Methods of Valuing Businesses

There are many ways to determine a business’s value. The right one for you will depend on the type of business you own and your goals. For example, determining a business’s value for the sake of securing a loan may be done differently than determining the value for the sake of getting a divorce. The three primary methods of business valuation are:

• Comparable analysis - Also known as the market value approach, this method compares the value of your business to other similar businesses in the area
• Asset-based approach - This method calculates a business’s value by comparing the business’s total assets to a business’s total liabilities
• Earnings approach - This approach assesses a business’s value by determining how much revenue the business has the potential to produce in the future, looking at past earnings, existing contracts, and expected future cash flows
• Whichever method you use, be prepared to gather extensive documentation on things like:
• Your business’s reputation
• Your business’s age
• Trademarks
• The uniqueness of the product or service your business offers
• Past tax filings
• Employee pay records
• Expense records and invoices

When Does a Business Owner Need to Assess a Business’s Value?

There are many situations in which a business owner may need to assess the exact value of her business. These include, but are not limited to:

• Securing an investment or a business loan
• Growing a business and identifying opportunities for improvement
• Filing taxes or providing information for an audit
• Buying out or bringing on a business partner
• Getting a divorce in which a business must be divided
• Setting a fair price for employees who want to buy or sell company shares
• Selling a business

Note that many of these will involve not only valuing a business but following up on business law concerns in areas of complex legal overlap. This is where an experienced business law attorney can be helpful.

Get Help From a Wheaton, IL Business Law Attorney

Knowing the true value of your business is an essential part of being a responsible business owner. If you are interested in knowing the value of your business, contact the DuPage County business law attorneys at Stock, Carlson & Asso. LLC today. We have extensive experience in business law that often overlaps with other areas of civil law, such as family law in a divorce. Call us today at 630-665-2500 to schedule a comprehensive consultation.

Source: 

https://corporatefinanceinstitute.com/resources/knowledge/valuation/valuation-methods