How To Value Your Ice Cream Business

Knowing the total, and the accurate value of your business is important. It will have a significant effect on how you run your business based on the current financial health of your business. It will also help you have a contingency for the future. 

In this post, I’ve compiled different, effective ways to value your ice cream business. So, read on if you want to improve your ice cream shop’s financial health or attract investors. 

Here’s how you can value your ice cream business:

1. Refer to Book Value 
2. Use Liquidation Value 
3. Tally the Value of Assets
4. Base it on Revenue 
5. Use Earnings Multiples 
6. Do a Discounted Cash-flow Analysis 
7. EBITDA

Refer to Book Value 

Book value is the value of an asset determined by its balance sheet account balance. In the most basic sense, it tells you how much the company is worth. It can also help you determine which stock is underpriced or overpriced. 

To know the value of your ice cream business, you can refer to book value. You can determine your company’s book value by deducting its entire liabilities from its total assets. 

Use Liquidation Value 

Liquidation value is the expected price of an asset when it is given inadequate time to sell on the open market, minimizing its visibility to possible purchasers. It assists you in calculating the sum of money your business will make after its assets are purchased and its liabilities are paid. 

This is an effective method to know the value of your ice cream shop. To begin, subtract the value of a business’s assets and liabilities from its financial statement. 

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Tally the Value of Assets

The worth of your ice cream business can be estimated by looking at its financial statements. By tallying the value of your business’ assets, you’ll know how much sales you can expect. 

This is pretty simple. You can start by adding up the worth of everything the company possesses, such as all equipment and inventory. After that, deduct any liabilities. 

Base it on Revenue 

To know the value of your ice cream business, you can start by asking yourself, “how much does my ice cream business make annually?”

Calculate your ice cream shop’s annual revenue. After that, find a credible stockbroker to help you analyze the worth of a typical ice cream shop with a certain level of sales in the ice cream industry. That way, you’ll know if your ice cream shop is doing well or not.  

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Use Earnings Multiples

The earnings multiplier is a financial indicator that defines a business’s current stock value in terms of its per-share profit. It is used to acquire a more accurate image of a company’s true value because profits are a dependable measure of financial performance. 

You can use the earnings multiplier to know the current financial health of your ice cream shop. It can also help investors know the investment return.

You can follow this formula for earnings multiplier for your ice cream business:

Earnings multiplier (P/E Ratio) = Price Per Share / Earnings Per Share

• Price Per Share – this is the current market value of your ice cream shop’s stock. It is the exchange rate at which your shop’s shares are traded.
• Earnings Per Share – this is the net profit made by your ice cream shop per outstanding share on the stock exchange.

Do a Discounted Cash-flow Analysis 

This is also known as the DCF method. This strategy is based on future cash flow forecasts that are updated to determine the business’s current value. This method also takes inflation into account when calculating the present value.

This uses a “net present value” (NPV) calculation, a complex formula that looks further into the future. So, it is ideal to use an online NPV calculator like Calculate Stuff’s NPV calculator.

The formula for the DCF method:

DCF = (CF/(1+r)^1) + (CF/(1+r)^2) + (CF/(1+r)^3) +  (CF/(1+r)^n)

• CF – Refers to the cash flow in a certain period
• r – Refers to the discount or interest rate. 
• n – This refers to the period number. 

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EBITDA

This is also a great method to value your ice cream business. It is also knowns as earnings before interest, taxes, depreciation, and amortization.

This approach will help you effectively assess and compare the profitability of your ice cream business across firms and industries since it excludes the effect of finance, government, or accounting decisions. So, in the most basic sense, this delivers a more direct depiction of your profits.

Using this EBITDA equation, you can compute earnings before interest, taxes, depreciation, and amortization:

• EBITDA = Net Income + Interest + Taxes + + Depreciation and Amortization 

Conclusion 

All in all, these are the methods to help you value your ice cream business:

1. Refer to Book Value – You can calculate your company’s book value by subtracting its total liabilities from its asset value.
2. Use Liquidation Value – To begin, subtract the value of a business’s assets and liabilities from its financial statement. 
3. Tally the Value of Assets – Start by calculating the value of everything your ice cream shop has, such as all equipment and inventory. Then subtract any liabilities. 
4. Base it on Revenue – You can value your ice cream shop by looking at your annual revenue. 
5. Use Earnings Multiples – This helps you know the current value of your ice cream shop based on price-per-profit.
6. Do a Discounted Cash-flow Analysis – This is a formula that looks further into the future of your ice cream business.
7. EBITDA – It eliminates the effect of financial, government, or accounting decisions, resulting in a more clear and more honest portrayal of your earnings.

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Frequently Asked Questions

To learn more on how to start your own ice cream/gelato business check out my startup documents here

This blog post is provided for informational purposes only. The information contained is not intended to constitute legal advice or to substitute for obtaining legal advice from a qualified attorney.