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Trade, 07/05/15

Sale value of shares in a limited company



If we are interested in selling or buying shares in a limited liability company (SL), we will need to "value" them. Each share in the capital of a company is a "part" of the company; the sum of the shares represents the entire company.

If all shares are equal (which is most common), the value of the share will be the quotient between the value of the company and the number of shares into which its capital is divided.

But how do you value a company? That's not an easy task, although in this post we'll try to simplify it. Remember, too, that there are limitations and rules governing the sale of shares in a limited liability company that must be taken into account after the valuation before proceeding.

To begin, we will separate the companies into two large groups: those that only manage assets and those that have economic or business activity.

If our company is a holding company, we must add up the market value of each of the elements that make up its assets (the property it owns or the rights it holds). For example, if it owns real estate, its market value, which can be obtained from a real estate website; if it owns shares in publicly traded companies, their stock market price; if it owns a car, the listed prices on classifieds websites, and so on for each of its properties. From the sum of these values, we must subtract the debts, and we will have the value of that company.

If our company is a business, we will have to value its activity, which is much more difficult. Companies are almost always valued by measuring their capacity to generate future profits. This measurement is obtained by applying a complex formula to the financial projections typically found in the Business Plan . Debt is always subtracted from this value.

Thus, a Business Plan is fundamental for understanding the value of an economic activity because it explains its strategy, objectives, and the means to achieve them, and above all, it puts a monetary value on them. But we know that most SMEs in this country don't have a Business Plan. How are they valued when they are sold? Probably poorly.

We advise you: "We know you need a Business Plan"

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