What is Your Business Worth? Don’t Forget the Assets That Are Not on The Balance Sheet

The starting point for figuring out what your business might be worth is your balance sheet. This financial statement shows you what you have and what you owe. However, the balance sheet is governed by the rules of accounting. Accounting rules do not recognize an asset unless there is a transaction. Due to this rule the value of a client list is not shown on the balance sheet unless you bought the list. Generally, clients are acquired over time, one does not usually pay for a client, so there is no transaction. For service businesses the client list could be the largest asset that a business has to sell, and it is not on the balance sheet.

If you are thinking of selling your business it is important to remember that the balance sheet generally shows your assets at their cost, not what they might be worth. Your balance sheet is still the starting point for valuing your business, but you have to adjust the numbers you see on the balance sheet to their expected selling price and add in the assets that are not on the balance sheet.

No comments yet.

Leave a Reply

Painless Financial Training Group Inc. with Debi Peverill

Understand Financial Stuff, Painlessly