Determining The Worth Of Your Biz

The Sydney Morning Herald:

There is no hard and fast rule for working out the value of a business. Some industries base the value on the turnover, such as professional practices like accountants, while others have established valuation methods that are peculiar to their industry, such as newsagents.

Using accounting principles the goodwill value of a business is calculated by multiplying the sustainable net profit by a factor that relates to the risks associated with the business. Sustainable net profit is calculated by increasing the profit of a business for ownership costs, such as interest on borrowings, and decreasing it to allow for wages that have not been taken by owners that work in the business.

Photo by Diana Parkhouse

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