1. Add up the value of assets

Adding up the value of all the assets in a business is a good way to work out how much a business is worth. This includes everything from stock and materials to machinery.

Stable, established businesses with a lot of tangible assets are often suited to being valued on these assets. Good examples of businesses like this are those in property and manufacturing.

Bear in mind you’ll also need to subtract any debts or liabilities from your asset valuation.

To do an asset valuation, you need to start with working out the Net Book Value (NBV) of the business. These are the assets recorded in the company’s accounts.

Then, you should think about the economic reality surrounding the assets. Essentially, this means adjusting the figures according to what the assets are actually worth.

For instance, old stock depreciates in value. If there are debts that aren’t likely to be paid, knock those off. And property could have changed in value, so refine those figures, too.