Back of the Envelope Business Valuations
I am fascinated by online tools that help you value your business.
You know the ones I am talking about. They’re interactive tools where you plug in a few bits of information into some text boxes on a website. Then you instantly get back a valuation range for a business in your industry. Or you might get back comparable sale data on businesses that have sold recently.
These tools fall somewhere between mere fun and giving you a quick ballpark idea of recent sales amounts:
- CNNMoney.com has a very general business valuation calculator. It calculates multiples of earnings for six broad industry categories.
- BizBuySell.com offers free business valuation comparables. These are much more detailed than the CNNMoney tool. You can break down your inquiry into narrower industry categories and get much more granular. Also, they generate cash-flow multipliers and revenue multipliers. However, they only cover the BizBuySell listings.
Naturally, I would not recommend relying on these tools in setting or negotiating a sales price, unless you are talking about a very small business (perhaps an ad-based website) where your expectation of a purchase price is $10,000 or something like that. In those situations sellers typically do not get valuations done anyway (because the low price does not justify the expense of a valuation), so I guess a free online calulator is better than nothing.
Most businesses, however, require a true valuation done by a trained professional. He or she can help get the most for a business should your company go up for sale.
But that doesn’t mean you can’t have a little fun with one of these online tools. 
