Business valuations are both a science and an art. The following is a simple formula for a ball park valuation of a service business. It is just a rough estimate and you should seek professional advise before any action is taken.
Simple Valuation Formula
- Determine total owner benefit. Owner benefit is the owners salary and profit distributions plus any excessive fringe benefits such as company cars, entertainment, family cellphones, club dues, etc…
- Determine the fair market resale value of all fixed assets and inventory. How much would it cost to purchase used assets and inventory to set up your business.
- Multiply the Net Owner Benefit by a factor of 2.5 and then add the value of the tangible assets. The total is a ball park valuation.
Valuation of Your Business For Sale
If you business is worth less than $1,000,000 we recommend that you contact Dave Marlo at St Louis Group Business Brokers. To view their website please use this link: www.saintlouisgroup.com