How much is my company worth????

[diggerjohno]

Can anyone give me a rough idea how banks etc work out how much a company is worth??
I was told 10 x annual net profit? Any ideas....i just need a rough calculation. I know it depends on many factors i.e.contracts, Debts etc

[Eric Mc]

This is one of the most popular questions on PH.

Do a search on the Business Forum and you will get quite a few "hits" on this topic.

[nickf]

Honestly, you might as well ask how long a piece of string is.

For what it's worth, when I'm looking at a company I'd typically expect to pay 7-8 x EBITDA, depending upon business sector, order book, debtors/creditors, pension deficit, onerous property contracts, strength/retention of management, IPR .....

Have paid as little as 4x, as much as 14x.

[tigger1]

I'll give you £550, but that depends on future orders (and as such does not constitute an official offer, merely an invitation).

[eccles]

go on dragons den and ask for some money, and they'll tell its worth nothing!

[diggerjohno]

I tried Dragons Den, they got back to me but said i didn’t need the money as the company was doing well, i just wanted the experience and advice tbh. I also asked for the maximum £150k So if i say around 9 times that's about average.

[justinp1]

diggerjohno said:

I tried Dragons Den, they got back to me but said i didn’t need the money as the company was doing well, i just wanted the experience and advice tbh. I also asked for the maximum £150k So if i say around 9 times that's about average.

Agreed.

From watching that programme it seems obvious that the 'how much is my company worth' question, when it is answered by the owner, it is about 4 or 5 times over its realistic value.

Often company X turns up with profits of 50k in the first year asking for 100K for 15% share - unless the company owns something of real commercial value such as a patented design which is highly commercial then 99% of the time the 'personal assessments' of the owner are highly unrealistic.

As others have said, there is no hard and fast value apart from the single rule - it is worth what someone is willing to pay for it.

You can use the rule X times turnover, or X times profit or X times the number of Christmas cards you got from customers last year, but all those figures tell you is if you divide the total by the same factor you used, you end up with the number you first thought of.