Small Business Valuation Formula
Small business valuation formula are the tools used by business valuers to benchmark businesses against their peer groups.
Some of the most commonly used small business valuation formula terms to describe the business's profits and the price the business sells for are:
EBITDA- earnings before interest tax depreciation and amortisation
EBIT- earnings before interest and tax
NPAT- nett profit after tax
PEBITDA- proprietors earnings before interest tax depreciaton and amortisation
ROI- return on funds invested
ROFI -also return on funds invested.
Small business valuation formula are all about the relationship between the profit a business can maintain and the resulting value that profit gives the business in the marketplace.
Knowing the appropriet small business valuation formula to apply for each particular business is critical as inapproprite use of the wrong small business valuation formula can result in an inaccurate valution of the business.