Business Vaulue

whitesheep

I've just been offered a business for sale. I'm just wondering is there a formula for vauluing a business?
he is looking for a multiple of the turnover, I'd be more comfortable with a multiple of the profit?
I know commercial property is a very simple formula. 10 times the rent plus a bit.
I once sold a business and I got 4 times the profit but it wasn't very profitable, but this business is well established and profitable.
I want to have some clue before I meet him next week.

thanks

sysprogrammer

pay a few hundred to get professional help , you make your money(savings) when you buy.

Turnover is vanity, profit is sanity ,so stick to a value that is affordable.

lastly, and nothing personal , but why are they offering it to you ?
has it been hawked around their industry already, and no existing operator wants to touch it ?

rgds,
Sysprog

davo10

Get a professional to check EBITDA, the purchase price for a business is usually a multiple of this.

sysprogrammer

don't check EBITDA , and certainly don;t use the word Multiple, I tried to avoid it as the business may not be even worth 10c

What I am trying to get at is that the business may not be worth anywhere close to 100% , never mind a multiple.

Seek professional advice and then low-ball.

for the 2nd time today : You make your money when you buy

hth,
Sys

other considerations - if they have one or two big customers that account for a big % of the business that potentially makes it riskier as if that's lost the business impact is large.