Do you know the value of your business?

If you're an entrepreneur, business owner, or self-employed person and haven't asked yourself how much your business is worth, you're ignoring a very valuable piece of information. And yes, I'm referring to the price it could be sold for.
Even if you don't intend to sell your business, knowing how much it's worth or how to calculate that value is important. Often, especially if it's our first successful venture, we add extra value based on our emotional attachment, which can cause us to miss out on opportunities. Other times, due to ignorance, we undervalue the business.
Having a sound or realistic idea allows us, even if the goal isn't to sell, to make better decisions regarding expansion or investments. We may even realize that the goals we had when we started can be achieved with the sale.

While selling or not is not a simple decision, it is something we should make in an informed manner. This decision is not only influenced by personal goals and aspirations; it must also include the business's own metrics. I wish that starting a business were as simple as some neo-gurus make it out to be, but it isn't. Taxes, profit margins, state-of-the-art, market saturation, competition, etc. must all be taken into account. And all of this should be taken into account when calculating the value of a business.

I wish everything were simple, but the truth is that there are different valuation methods that have specific aspects depending on the sector.

Classic Valuation Methods

Income Approach (Cash Flow Valuation)

1. Discounted Cash Flows (DCF):

• Project future cash flows (3-5 years) based on commission income, transaction volumes, and operating margins.
• Apply a discount rate that reflects the business risk (WACC or required cash flow rate).
• Terminal value: Estimate the residual value of the business at the end of the projected period.

1. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) or Revenue Multiples:

• Use industry multiples (5-8x EBITDA if the business is stable).
• Adjust for growth, profitability, and specific risks.

Market Focus (Comparables)

• Analyze recent sales of similar remittance companies (size, geography, business model).
• Look for transaction multiples (value/EBITDA, value/revenue) in industry reports.
• Adjust for differences in scalability, regulations, or market share.

Asset Focus

• Calculate net worth (assets less liabilities).
• Relevant if the business has significant tangible assets (patented technology, exclusive licenses, approved bids, etc.).

This is usually a floor value, as it doesn't capture intangibles such as the client base or the geographic diversity of operations.

Calculating the Value of a Small Business

The recommendation is not to rely on just one of the above methods but to combine them. Although this can be very useful for large companies or corporations, in practice it complicates matters a bit for small businesses and startups.
Personally, EBITDA is a figure that doesn't offer me any certainty; I prefer to analyze the breakdown of expenses and net profit.
Ideally, it would be best to seek professional help and hire a financial services advisor or independent appraisers, but this is something that many cannot afford or simply doesn't exist (in my country, Cuba, for example).
However, there is a simple approach that all small business owners can take, which will give us a fairly accurate idea of ​​our business's value. It involves analyzing the monthly net profit and adding the business's equity (assets less liabilities). In this case, we'll use @canje as a practical example, a small remittance business to Cuba or exchange of $HBD, $HIVE, and $LEO for Cuban pesos.

1. We annualize the net profit

• Monthly profit: $12,500
• Annual profit: $12,500 × 12 = $150,000 pesos (annual net profit).

1. Apply a valuation multiple

The value of a company can be calculated using multiples based on net profit if the company is small and does not have significant debt.
For small remittance businesses, typical multiples range from 2x to 5x annual net profit, depending on factors such as:

• Stability of cash flows.
• Historical growth.
• Licenses or proprietary technology.
• Regulatory and competition risks.

1. Estimated value calculation

• Conservative range (low multiple: 2x):
  $150,000 × 2 = $300,000 pesos.
  Justification: Company with high competition, dependence on few clients, or volatile margins.
• Moderate range (mid-range multiple: 3.5x):
  $150,000 × 3.5 = $525,000 pesos.
  Justification: Stable company with recurring clients, assets and core technology (e.g., digital platform).
• Optimistic range (high multiple: 5x):
  $150,000 × 5 = $750,000 pesos.
  Justification: High growth, valuable licenses, or strategic synergies for a buyer (e.g., access to a new market).
  In the case of CANJE, we would use a moderate range.

1. Add net worth

In this case, the business has net worth (reserves) of $357 HBD, currently equivalent to $132,090 pesos.
We used the moderate multiple (3.5x):

• Base value: $525,000.
• Estimated final value: $525,000 + $132,090 = $657,090 pesos (~1,776 HBD).

Conclusion

I have to admit that this figure surprised me. In Cuba, that's a lot of money, so with that number as a guide, if someone wants to buy, I'm open to negotiations.

This method of calculating a business's value not only helps you as an owner understand what you have, but also, as a buyer, allows you to get an idea of ​​whether you have a good deal or not. Of course, selling or buying also includes other intangible aspects, but being clear about the tangible aspects is quite useful.

Now, as an entrepreneur, do the math and tell me, how much is your business worth? Is it worth more or less than you thought? Are you willing to sell for that amount?

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