What's the formula for calculating the value of a business, such as a restaurant, ice cream store or small ret

Pricing a property that includes the business.
In Selling Property - Asked by Rick L. - Mar 6, 2013
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Answer(s)

Jeffrey F.
Property/Asset Manager
Liverpool, NY

Generally a multiple will be used for calculating the value, but there are many variables within the business that can increase or decrease the multiple. multiples are generally attributable to profitability I have personally seen multiples of 3-7 depending on what type of business. Best to talk to an accountant about how they value them, or a business broker. Also, some businesses rely on the real estate they occupy to be successful, that certainly will factor in to what the business is worth on its own.

Mar 6, 2013
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Ronald L.
Broker/Agent
Honolulu, HI

Can you let me know when you find out? Thanks.
Ron
aloharon@hawaii.rr.com

Mar 7, 2013
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Brian Y.
Broker/Agent
Wilmington, NC

Rick - The typical rule of thumb is 1.8% of net benefit to owner. Usually if the equipment is in good condition you can add the current value of that and also inventory.

Mar 7, 2013
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Ann S.
Owner/Investor
Memphis, TN

Usually, the value is net cash flow times a multiple. I was in treasury for a national restaurant chain for 5 yrs and I am a CPA. We tried to sell at 8 times cash flow and buy at 5 times cash flow. The location of the business is very important and will help determine the multiple. When doing your due diligence, you should study the operations and the financial information to find ways to increase cash flow. Cash flow is the most important factor because every business that fails does it because they run out of cash or ability to get cash.

Mar 7, 2013
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Chris S.
Broker/Agent
Coeur D'alene, ID

Business ... 1 to 2x the net income (income net of owner's salary and all expenses) +
Real Estate ... valued via market +
Equipment and Inventory ... valued at 10 cents on the dollar
At least that has been my experience with small, local businesses with limited operating history.

Mar 11, 2013
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Martin G.
Broker/Agent
Fortaleza, CE

I have a very special situation......I am working with an owner of class AA clientele public restaurant who is looking to sell 49% of shares of his company in order to expand into another much more favorable ( the best location in Fortaleza City North East Brazil 4th largest in the country )new location ( remodel costs, rental, taxes, no need for new equipment ) and we need to evaluate appraise the current net worth and the future projections of expansion, then figure out price value to charge an investor who would come into the company in order for this expansion. All tips advice comments suggestiosn and thoughts are welcome.
I have worked in Brazil as an investment advisor for over a decade in real estate, hospitality, alternative energy, mineral ore mining, agriculture, foreign commerce ( export import ) market entry/exit, a bit of branding, etc....my email is jazmartin@gmail.com

Mar 19, 2015
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