How do you determine the value of a business?

There is so much more that you need to find out before you can put a value on that business.

First of all, what does his Balance Sheet and Profit and Loss statement look like?

You need to know the assets and liabilities. It doesn't matter if he grosses a million a year if he is spending 1.5 million!

If he owns the property, what is it worth? What are the taxes and other expenses? What is the payroll, payroll taxes, unemployment tax rate, workman's comp, and other insurance costs?

Take a closer look at ALL 5 categories: Assets, Liabilities, Capital, Revenue, and Expenses before you decide on an offer.

There are many different methods for valuing a business. It can be a multiple of the Gross Sales, a multiple of net income, etc, etc., and each type of business seems to have it's own method.

Therefore talk to a business broker. They should be able to give you accurate information.

Don't use a business broker, they'll charge you 10% of the deal value. You don't need a broker that will charge that much. If he has a buyer in mind he can look into using an attorney to handle the docs on it.

If you want to get a set of financials to me I can find the value for you using multiple methods.

A buyer would expect to recoup his investment in three years.

Therefore, take the last years net profit and multiple by three to obtain a proper selling price.

e.g Gross $400,00/yr.....Net Profit $80,000

Selling Price $ 240,000