Did you know that over 2,300 small businesses were sold in the first quarter of 2025 at a median price of $349,000? If you’re a business owner, that statistic might make you wonder: what is my business really worth?
The truth is, there’s no single answer. Business valuation depends on multiple factors, and no two businesses are exactly the same. However, there are three widely used approaches that can help you understand the value of your business.
1. The Asset-Based Approach
This method looks at the total value of your company’s tangible and intangible assets. It’s often used in liquidation cases, where the business is being closed and the assets are sold off. While it may not always reflect ongoing earning potential, it gives a solid baseline value.
2. The Earnings-Based Approach
Here, the focus is on your company’s profitability. Valuators apply an industry multiple to normalized earnings to estimate how much your business could be worth to a buyer. This approach is especially useful for businesses with steady cash flow.
3. The Market-Based Approach
This method is a bit like real estate comps, it compares recent sales of similar businesses to gauge a fair price. If other businesses in your industry and size range have sold recently, this approach provides helpful real-world benchmarks.
Why Valuation Isn’t Exact
Even with these approaches, business valuation is rarely precise. Factors such as:
- Ownership share
- Market prospects
- Reputation and goodwill
…can significantly influence the final number. At the end of the day, a business’s true value is what a willing seller and a willing buyer agree upon.
Getting It Right
If you’re thinking about valuing your business; whether for a sale, investment, or future planning, it’s essential to work with legal, tax, and valuation professionals. The right advisors will help you avoid mistakes, maximize value, and gain insights for your next move.
Final Thoughts
Valuing a business isn’t just about numbers, it’s about strategy, negotiation, and perspective. By understanding the different approaches and working with experts, you’ll be in the best position to uncover your business’s true worth.
