Valuing a business is a complex task which takes into account many variables. In the simplest sense, the market value of a business is determined by the following:

1.) "Tangible or Physical Assets"-A business may have physical assets including: equipment, furnishings, inventory, real estate and vehicles

2.) "Intangible or Non-Physical Assets"-A business may have non-physical assets including: accounts receivables, banks accounts, client/customer lists, credit lines and goodwill

3.) "Cash Flow"-This is the revenue stream that a business is generating and, after the expenses have been deducted, determines the net profit that the business makes.

After all of these assets have been valued, you are able to arrive at a calculation for the "market value" of the small business. However, in spite of all of your most detailed calculations, please remember the old adage that "A BUSINESS IS ONLY WORTH AS MUCH AS SOME BUYER IS WILLING TO PAY FOR IT".


Rule of Thumb Business Valuation Guidelines:

1.) an extremely well established and steady business with a solid market position whose continued earnings will not be dependent upon a strong, management team and where there is no competition

* VALUED @ 4-5 TIMES CURRENT PROFITS *

2.) an established business with good market position, with limited competitive pressures and with some variability of earnings requiring continuous management attention

* VALUED @ 3-4 TIMES CURRENT PROFITS *

3.) an established business with no significant competitive advantages, with business competition, few hard assets and heavy dependency on management's skills for assuring success

* VALUED @ 2-3 TIMES CURRENT PROFITS *

4.) a small personal service business where the new owner will be the only, or one of a few, professional service providers

* VALUED @ 1 TIMES CURRENT PROFITS *