Determining the worth of a jewelry business is necessary under several circumstances, such as setting up estates, wills and trusts involving the owner. The business may be inherited by one sibling while the others get other assets equal to the value of the business. Obtaining insurance is another reason, as is selling the jewelry store.


Assets include cash, inventory, materials, accounts receivable, equipment, furniture and fixtures and the building and land if those are owned by the jewelry business. A challenge with valuing inventory is that gems -- precious stones -- fluctuate in value. What is reflected on the balance sheet is what the gem was purchased for -- not what it's worth today. Additionally gems, especially diamonds, vary widely in value. For example, a diamond that is yellowish is much less valuable than a clear or blue-white stone, all other factors such as carat weight, cut and clarity being equal. Metals such as gold and silver may have wide price swings -- up or down -- during the course of a year. Obtain current appraisals of major gemstones in inventory. Look up current market values of precious metals.


Liabilities include what the business owes -- such as bank loans, leases and accounts payable. Contingent liabilities are those that might happen, such as a lawsuit that has been filed from a customer accusing the owner of switching out diamonds in her ring when he cleaned it. It's difficult to put a dollar amount on the contingency because you don't know if you'll lose the lawsuit, settle or the amount of the judgment if one is awarded.

Formula Based on Net Worth

The formula is simple. Add up all the assets and subtract the liabilities. The difference is the value of the jewelry business also called net worth or owner's equity. This method does not consider the value of the jewelry store as an ongoing business. For example, your jewelry store might break even when assets are subtracted from liabilities but generate a hefty salary for you, a company car and other benefits. Assets such as intellectual property, a customer list and vendor relations are difficult to value. For example, you may have an agreement with a mine that gives you first choice to purchase rough-cut tanzanite gems. That agreement has value but it's a challenge to appraise.

Other Methods of Valuation

Assets minus liabilities isn't the only method of valuation. Businesses are valued on a multiple of earnings or revenue basis. The multiple depends on the industry. A jewelry store owner should consult a private company valuation expert about the typical valuation for that industry. A fire sale value is what would happen if you had to dissolve the business immediately and sell all assets within a short time period -- in other words, a garage sale approach. The jewelry business might have a higher value than assets minus liabilities if the buyer is considering the business as a synergistic acquisition; perhaps the buyer is a wholesaler of jewelry and wants to expand into retail. Another example is a retail jewelry store that seeks to establish a presence in your geographic area.