Simple Business Value Formula

Creating value for your business is an integral part of running any company, but how do you know if your organization has enough value? More importantly, how can you create more value to make sure you're noticed?

The simple way to determine if your products and services are worth it is by looking at what they have achieved for other companies. What benefits have you helped another company achieve through your product or service?

If you've ever watched a movie before, you've probably seen those scenes where someone says something funny that makes the audience laugh. Yours mission then becomes to find ways to make people laugh, and hopefully get them to agree with what you said so that they will spread word about you!

That's exactly how marketing works-you have a message and goal that depends on getting attention in order to succeed. Productivity apps are a great example of this - there are many free and paid applications that help users organize their time, keep notes, etc., so they don't need to buy one from the store.

This article will talk about five easy ways to evaluate the market value of your business. These strategies won’t cost anything extra, but they can prove very valuable in determining whether or not your business is worth investing in.

Calculate your turnover

simple business value formula

A simple way to determine if your business is going down the right track is by calculating your average turn-over. This can be done at the end of a month or quarter, depending on what time frame you choose to use. By looking at how much your business made compared to how much it spent, we are able to calculate our average turn- over.

Your turn-over equals sales minus cost divided by number of days in the period being analyzed. For example, if my company sold three units for $1,000 each, then I would have a total income of $3,000 and a cost of $500 per unit, making our average turn-over 3/5 or 0.6.

A high turn-over means that your business is spending more than it makes, which is not good. You want to make as much money as possible so that you do not have to spend too much to keep your business running!

Simple ways to help your business lower its turn-over

By having basic managerial skills, you will be able to reduce your turn-over significantly. The more knowledge you have about your business, the better chance you have of lowering your turn-over.

There are many things that influence whether or not your business has a low turn-over, but here are some basics to start with:

* Make sure your products are wanted. If people do not like what you sell, they will not buy it.

Calculate your profit

simple business value formula

A simple way to determine if your business is profitable or not is to calculate your average profits per month as a percentage of monthly sales.

A more accurate way to do this would be to divide overall revenue by months, then divide that number by your average monthly profit to get an adjusted numbers.

For example, if you earn $5,000 per month after costs, then it is considered unprofitable.

However, if it takes three months to make one sale, then your average monthly profit is actually zero!

You have to deduct the cost of goods from the income before calculating how much money you made per month. This changes what kind of profitability you look at for your business.

Another way to do this calculation removes the need to subtract costs, but may not give you the most honest results.

By looking at only gross profits, there are some companies that spend large amounts of money in order to reach that number. You must also consider how efficient your business is in making money.

I recommend using both calculations and seeing which one gives you the better understanding of whether your business is running efficiently.

Calculate your assets

simple business value formula

A simple way to determine if you are providing enough value to your business is by calculating your company’s asset base. Assets include things like equipment, furniture, vehicles, land, etc. that contribute to the running of your business. By having these, you can run your business with less money- you can produce more products using old equipment or use public transportation to get to work!

By adding up all of your business’s assets, you can see how much money they cost. The healthier your business, the lower the total will be!

By looking at this number, you can determine whether or not your current state of affairs is working for your business.

Calculate your liabilities

simple business value formula

In addition to calculating your monthly income, you must also calculate your monthly expenses. This includes all of your bills, loan payments, subscriptions, and other recurring costs that you pay each month.

It’s very common to spend more money than you have when you begin working for yourself. It can be difficult trying to find ways to reduce your spending unless you are willing to give up something you want or need.

Fortunately, there are several easy things you can do to save some money without sacrificing much. You can cut back on unnecessary expenditures by looking in the mirror and asking how much you really wanted this item.

You may feel compelled to buy one thing even though you don’t truly need it, but if you think about it, you’ll realize you don�bleftieverexplainwhyyouneededit. By giving these items away or selling them, you can make room for new ones which will help you achieve your goals.

There is an easy way to determine whether you should keep an expense as part of your budget or if you should remove it. If you can afford to lose the expenditure, then drop it! If you cannot, keep it within reason.

By having a basic understanding of your own personal financial situation, you will know what changes to make to ensure you meet your financial obligations.

Calculate your creditworthiness

The next step in business owner success is figuring out how to manage your money. This includes both keeping up with monthly bills, as well as monitoring your debt level.

It’s important to know that too much debt can hurt your financial health even if you are trying to spend as little money as possible.

Many people make the mistake of thinking they can afford their debts now, but it’s impossible to maintain this perception once all of your bills start being paid. Your income may have dropped, but your obligations haven’t.

By setting yourself too high a standard for spending, it becomes increasingly difficult to do so. It also makes it more likely that you will run into trouble when you want to pay off one of your loans or take out a new loan.

If you feel like you can’t meet your commitments now, then consider whether there is something about them that you can reduce or get rid of. For example, if you need to keep an expensive phone for work, could you use Google Voice instead? If you can’t cut back on food expenditures, why not look into online shopping sites?

And don’t forget about savings! Even small changes to your daily routine (like doing yoga before work) can add up and help you reach your goal faster.

What is your insurance cover?

simple business value formula

Even more important than knowing what services you offer are your coverage limits or limitations. These determine how much you will pay for each service, and if it is covered by your insurer or not.

Your insurance policy should have details of what treatments and therapies are completely free to use as well as what costs per minute they can be conducted under. If there are no cost caps, then you could spend all day on YouTube singing along to ‘Happy’!

Most people do not realize that mental health issues such as anxiety and depression can actually lead to physical conditions like diabetes. So if you are too scared to talk about your fears in therapy because you fear being diagnosed with something else, you may be putting yourself at risk of illness and death.

By avoiding needed help and treatment, you are also hurting other people- potential friends, family members, colleagues and even strangers who see you struggling and suffer due to your lack of self-care.

What are your savings?

simple business value formula

The next thing to do is determine how much you’re spending in comparison to what you need to survive as an entrepreneur. How many times have you heard entrepreneurs say that they cannot afford to pay their bills because of all of the expenses they have?

They feel like they are running out of money every month, but what they fail to realize is that they could be saving or even making more than they think!

By comparing your monthly expenditures with what you really spend, it can help you find ways to save money. For example, let’s assume you spent $1,500 per month on personal loans and obligations.

You also believe you deserve a salary of $5,000 per month. Unfortunately, you cant make that happen unless you work hard for it.

However, you might not know that you could get by paying only $2,250 per month instead! This is possible if you reduce your unnecessary debt and live a simple lifestyle. You would still enjoy the same things you wanted before, just probably less expensively.

There may be instances where you can earn slightly more than you were before, but most likely, you will find there is enough left over to satisfy your needs.

If you take time to look into the truth about why people spend so much, you will quickly learn that it has little to nothing to do with living a wealthy life.

Do you have a family?

simple business value formula

What about your friends? Are they important to you? If so, how much time do you spend with them? How valuable are those relationships to you?

Most people feel that their work colleagues or friends are not very significant in their lives. They may even feel like they’re wasting their own time by investing energy into these individuals.

But what if I told you that there is a way to measure just how important each of these individuals is to you as a person — and as an entrepreneur?

It’s a formula we call The Personal Entrepreneurial Success (PESS) Ratio. Just like you can calculate someone’s income using his/her monthly salary and total spending, you can also determine the importance of individual members of your team via this ratio.

About The Author

Tiara Ogabang
Tiara Joan Ogabang is a talented content writer and marketing expert, currently working for the innovative company With a passion for writing and a keen eye for detail, Tiara has quickly become an integral part of the team, helping to drive engagement and build brand awareness through her creative and engaging content.
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