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How to value a small business?

I am looking for a simple formula to value a small business that I am interested in buying.

6 Answers

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  • Anonymous
    10 years ago
    Favorite Answer

    Pricing a business correctly is important if you really want to sell it. As a consultant I talk to many business owners, brokers, and agents on a daily basis about valuing businesses. It always amazes me on how some of these individuals come up with the values on small businesses being sold. No wonder only 30% of all businesses sell. In many instances no consideration is given to the total picture—will the available cash flow of the business be able to pay the debt of a loan, will the deal as structured or priced be attractive to financing sources, "cash" price vs. "note" price and how these factors figure into the equation.

  • glise
    Lv 4
    4 years ago

    hi, the answer to it somewhat is extremely plenty an paintings not a technology, I even have run my own small company fairly some years in the past. My expertise of it somewhat is as follows:- To calculate the approximate fee of the corporate you will desire to attempt and place a financial fee on assorted products & those might tangible products as nicely as non tangible. No.a million so which you will possibly prefer to rather well worth the corporate's fastened sources which includes they're, so as that must be autos, belongings which includes an place of work construction, computing gadget & IT kit, place of work furnishings which includes desks & chairs,etc,etc. No.2 next you will possibly prefer to contemplate what capitol you have in financial business enterprise, in value decrease cost rates, in debits, in monies using you from consumers or different providers, funds locked up in shares,etc. No.3 you will possibly choose contain the cost locked up in any inventory held via the corporate (products not offered yet). and how plenty those may well be well worth. No.4 Databases & there linked datasets are quite VERY useful, quite if the dataset is precise & upto date. Calculate the cost of any shopper database your organization holds. No.5 additionally dont forget to contain a calculation of what the skill destiny income may well be for the subsequent one or 2 years (projected or predicted income). upload numbers a million to 5 mutually and that would desire to offer you an approximate determine. the main suitable gadget for doing this I propose is to establish an Excel spreadsheet, why? because of the fact in case you create formula you are able to play around with the figures till you have faith the outcomes are the closest to the quite fee. desire that helps? IR

  • 10 years ago

    Best formula that is easy to use but VERY simple. 5x the yearly NET revenue. An example would be that if the company generates $5,000 a year in revenue after ALL expenses are paid then the company is aproximately worth $25,000. You just need to decide is the yearly revenue enough for you to justify the amount of effort it takes to run.

    Source(s): My Business Finance degree.
  • Raysor
    Lv 7
    10 years ago

    Net profit multiplied by one or two (unless you can see high growth). You need to look at the owners wages and/or drawings etc. and treat these realistically. Also look for any directors loan accounts or assets that have been 'loaned' to the business (like premises).

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  • Anonymous
    10 years ago

    income > expenses.

    and also find ways to enhance the services of your business. You will never know when that small business start to propagate.

  • Anonymous
    10 years ago

    Inventory+sales-rent and salaries. Or you can ask to see their books. Check their income and expense ledger see their Balance Sheets and decide.

    Source(s): Self: Accountant at http://www.micocrane.com/
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