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If you’re an entrepreneur who wants to sell your business, or simply curious, you must understand how to evaluate the value of a business. There are many ways to evaluate a company’s worth and each has its own pros and cons.

One of the most fundamental methods is to analyze the business’s assets and subtract the liabilities. This is a good way to look at both tangible and intangible assets such as inventory equipment or cash, investments accounts receivable, and financial backing. Liabilities include debts, creditor claims, and outstanding tax payments.

Another method of evaluating the performance of a business is using a formula based on the discounted cash flow method. This is a complicated calculation however there are many online calculators to aid you in determining the value of your business by looking at future cash flows and reducing them to present values. Western & Southern Financial Group provides, for instance, a free business valuation calculator that uses this method.

Market-based valuation is an effective method to determine the value of a company, and involves looking at similar businesses that are for sale in your industry to see the value they’re worth. This method isn’t always accurate, as businesses are often over- or under-valued. However it can give a good ballpark figure. It can also be helpful to combine this method with other methods of valuation to get a more complete picture of your business’s worth.