This is a example of valuation that I would use along with the comps of properties that have sold in the last year in the area.
Say you have a business that generates $100,000 in gross income. Your cost of goods was say $20,000. That means your gross income before expenses is $80,000.
Then, subtract your expenses. You have utilities, payroll, taxes, insurance and advertising costs of say $20,000. Personal expenses covered by the business, such as a car payment, health insurance, and travel costs, adds another $5,000.
total expenses would be $25,000, subtract expenses from your net.
That leaves a net income of $55,000. But adding back the $15,000 in personal expenses brings the business cash flow, (the true net profit), up to $60,000.
To determine an appropriate multiplier to arrive at your business's value.
Generally would be 1.5% to 2% of your Net for the year..
Example: 2% of your yearly net $55,000
Sale Price would be..$120,000
Inventory is purchased at cost by the buyer...
Hope this helps..
Mar 30, 2011