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What formula is now being used when considering a asking price ?

I have heard add the past 5 years of income and obtain an average for that total. Or now is it a 3 year total average?

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Answers (3)
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Homescape LLC
Cook County, IL


Some people look at the previous year(s) earning in deciding how much to pay for a business. Other(s) look at what the business could possibly make. The previous responders are correct, there is no one way to evaluate a business, it is really worth what you are willing to pay for it or receive for it. One professional said, "A business is worth what someone is willing to pay for it."


N. Coriano

Apr 3, 2011
Marv White
Hartford County, CT
Premium Broker

Hi Teresa, Julie is right, there is no formula. There are industry specific rules of thumb that may be helpful for an order of magnitude approximation. You will need get a professional business valuation done if you really want to know the value of the business.

Apr 3, 2011
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Hello Teresa,

Anyone who tells you that their is a 'formula' for determining an asking price for a business is either a liar or a fool. There are simply too many variables involved. For more detailed advice about how to evaluate a business, please visit my blog: - feel free to post any questions you might have - I promise to answer them ASAP.

Good Luck
Julie A. Barnes, CPA

Apr 1, 2011

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