# How Do You Price A Business For Sale?

There are a number of ways to determine the market value of your business.

• Tally the value of assets. Add up the value of everything the business owns, including all equipment and inventory.
• Base it on revenue.
• Use earnings multiples.
• Do a discounted cash-flow analysis.
• Go beyond financial formulas.

## How do I calculate the value of my business?

To find the value of your business, subtract liabilities from the assets. For example, if you have \$100,000 in assets and \$30,000 in liabilities, the value of your business is \$70,000 (\$100,000 – \$30,000 = \$70,000). With the asset-based method, you can find the book value of your business.

## How much should a business sell for?

There is plenty of room for judgment, but by and large, a profitable, reasonably healthy, small business will sell in the 2.0 to 6.0 times EBIT range, with most of those in the 2.5 to 4.5 range. So, if annual cash flow is \$200,000, the selling price will likely be between \$500,000 and \$900,000.

## What does the average small business sell for?

Businesses where the owner is actively-involved typically sell for 2-3 times the annual earnings of the company. A business that earns \$100,000 per year should sell for \$200,000-\$300,000. This is consistent with most listings on BizBuySell, a small business brokering site with thousands of companies available for sale.

## What is the rule of thumb for valuing a business?

Use price multiples to estimate the value of the business.

Another valuation rule of thumb is using price multiples, which base the value of the business on a multiple of its potential earnings. For example, nationally the average business sells for around 0.6 times its annual revenue.

## What is a fair price for a business?

The fair selling price for a business is the amount the seller is willing to take and the buyer is willing to pay. When buying a business, you cannot compare similar locations, as two identical businesses located side by side could be worth totally different amounts.

## How many times earnings is a business worth?

Bizbuysell says, nationally the average business sells for around 0.6 times its annual revenue. But many other factors come into play. For example, a buyer might pay three or four times earnings if a business has market leadership and strong management.

## What are the three methods of valuation?

When valuing a company as a going concern, there are three main valuation methods used by industry practitioners: (1) DCF analysis, (2) comparable company analysis, and (3) precedent transactions.

## How many times revenue is a business worth?

The times-revenue method uses a multiple of current revenues to determine the “ceiling” (or maximum value) for a particular business. Depending on the industry and the local business and economic environment, the multiple might be one to two times the actual revenues.

## How do you value a small business?

To find the value of your business, subtract liabilities from the assets. For example, if you have \$100,000 in assets and \$30,000 in liabilities, the value of your business is \$70,000 (\$100,000 – \$30,000 = \$70,000). With the asset-based method, you can find the book value of your business.

## How do you value a small business based on profit?

1. Profit Multiplier

1. Determine the multiple. If pre-tax profit is used, commonly applied profit multiples for small businesses would be between 3 to 4 and occasionally 5.
3. Average or normalized profit.
4. EBIT and EBITDA.
5. Present value.
6. Opportunity cost.
7. How it is calculated.
8. Market value.

## How many times Ebitda is a business worth?

Generally, the multiple used is about four to six times EBITDA. However, prospective buyers and investors will push for a lower valuation — for instance, by using an average of the company’s EBITDA over the past few years as a base number.

## What is the formula for selling a business?

Consequently, only use this valuation formula if the comparison company is quite similar to the owner’s company. Market approach – profit based. Compare the company’s profits to the sale prices of other, similar companies that have sold recently. For example, a competitor has profits of \$100,000 and sells for \$500,000.

## How do you value a private company?

Determining the market value of a publicly-traded company can be done by multiplying the its stock price by its outstanding shares. That’s easy enough. But the process for private companies isn’t as straightforward or transparent.