Much like real estate, there are both objective and subjective considerations when valuing your business. Overvalue it and run the risk of finding no buyers. Undervalue it and leave money on the table. Fortunately, resources and professionals are available to help you make a reasonable estimate of the value of your business.

The value of a business includes such assets as cash, equipment, inventory, real estate and receivables. These are tangible assets that have specific values, although at the time of a sale they could be discounted or inflated depending on the market for your business and interest of potential buyers. Overvaluing such assets as real estate and receivables could lead to overpricing your business and delaying or even preventing a sale.

The following examples provide some brief explanations of valuation methods you might consider. There are six main methods of valuing a business —  market capitalization, times revenue, earnings multiplier, discounted cash flow, book value and liquidation value.

The simplest way to value your business is to determine your market capitalization. Take the number of outstanding shares and multiply them by the current share price. If you have 1,000 shares outstanding and the price is $40 a share, the market capitalization of your business is $40,000. This method might not reflect the true value of your business, though, so consider one of the other five methods.

If you have a reliable, steady revenue stream you might use the times revenue method. In this approach, you take your revenue stream over some stated period of time and apply a multiplier based on the current economic climate and your industry category. A professional valuation expert can assist with determining your multiplier.

The earnings multiplier method often provides a more realistic valuation than the times revenue method since this method is based on profits rather than earnings. When using this method, you normally want to use in the calculation earnings before interest, tax, depreciation and amortization (EBITDA).

Multipliers are available online, including the  site at https://www.equidam.com/ebitda-multiples-trbc-industries. Businesses that produce a product often have a higher multiplier than a service or consulting company.

The discounted cash flow multiplier is similar to the earnings multiplier. This method looks at future cash flow estimates and adjusts them to current conditions. In effect, this adjustment generates a present value discounting inflation.

Book value provides a straightforward way to determine the value of a business. This figure comes directly from your balance sheet. Simply subtract total liabilities from total assets.

Finally, you could use the liquidation value method, especially if you have tangible assets with actual value. This method is based on the amount of money you’d receive if you sold all the business assets and paid off all your liabilities.

The preceding is only a partial listing of valuation methods. To ensure you get the best valuation, there are a few other steps you can take. Much like selling a house and clearing out the clutter and putting the property in the best possible condition, there are ways to fetch a higher selling price:

Develop a business plan for the future and show how your business could grow and prosper.

Sell or dispose of old inventory and equipment.

Prepare historical and projected financial statements to show why your business is a good value.

Make sure everything works. Get the office, factory floors or other business locations in good shape.

Demonstrate accounts receivable are actually collectable.

Resolve any outstanding issues and debts.

If you’re looking for a professional to handle your business evaluation, seek someone who’s Accredited in Business Valuation (ABV). This professional designation indicates the person has taken a course of study and passed examinations in addition to taking continuing education courses.