Hi CD friends,
is there any simple calculations to determine fair business valuation?
Who is qualified to determine the fair value of a business?
What is the cost involved to determine the valuation of a business? (assuming one has all the knowledge of the actual figures involved)
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mor
Whenever you experience joy, peace, security, equanimity or purity, it is only because you are aligned with ALMIGHTY.
in general business are sold for a certain multiple of net income. A private business generally may be sold for anything from 5 to 10 times net earnings. However for a private business earnings are difficult to estimate since what the owner shows on the books may not be true earnings but creative accounting.
If you look at public companies like Apple they trade at 15 to 16 times earnings which means that the buyer will recover his original investment in 15 years not accounting for growth in earnings and inflation.
If you are trying to value a private business have an accountant check their books closely to verify their earnings for the past 10 years and if they are substainable.
Thanks Newton,
Assuming all the figures indicated are genuine, what factor is to be used to arrive at the valuation, 5-10 times of earnings is indeed awide gap, is there an small business general factor we can use
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mor
Whenever you experience joy, peace, security, equanimity or purity, it is only because you are aligned with ALMIGHTY.
Location: Western Hemisphere
Posted on: 03-08-11 17:35:23
When I pursued the option of small business acquisition, my lawyer mentioned 3 to 5 times the net earnings as the valuation factor.
There are companies that do business valuations by completing an on-site assessment of the business that is for sale. You may be able to find one through online search. I never looked for one or used one.
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Dimple2001
