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If you’re preparing to sell your business, you’ll first need to know how much your company is worth by conducting a business valuation. It will give you, your investors and potential buyers a good idea of what your business’s value is by looking at both tangible assets like real estate and cash, as well as intangible assets like intellectual property.

The following are a few business valuation methods used by businesses to determine their worth.

Asset Business Valuation

Asset valuation measures the worth of your assets, such as inventory, equipment and real estate. Asset valuation works best if you don’t have a profitable business and are looking to liquidate. While this is a fairly simple and popular method of business valuation used by asset-based small businesses, experts warn that it does not accurately reflect the total value of your company.

If a company has $500,000 in assets such as computers, for example, the worth of the business is not automatically $500,000. A business valuation should account for what the companies do with those computers to create revenue and profits.

Asset valuation also does not measure intangibles, such as the goodwill of a company, according to Stan Feldman, chairman of Axiom Valuation Solutions and a finance professor at Bentley College. The goodwill of a company could include a loyal customer base or a solid relationship with suppliers. An appraiser can help integrate your company’s goodwill into a business valuation.

Market Business Valuation

Also called the rule of thumb or market multiplier method, this determines the worth of your business based on a multiplier set by your industry. For example, the benchmark for valuing companies in your industry may be three times sales. Therefore, you could theoretically value your company at three times its revenue. This method relies on industry averages, however, and may not reflect the true value of your small business.

Earnings Business Valuation

This is also called income-based business valuation or the capitalization of earnings method. Earnings valuation determines the worth of your company based on historic earnings. This method works well for valuing companies with strong intangible assets because it only calculates earnings and takes into account the risks for buying your business. It does not distinguish between the worth of tangible and intangible assets. Earnings valuation cannot predict future earnings as well as discounted cash flow, however.