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What is a common and practical gross mulitplyer and cap rate for an automotive repair shop which has six bays

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Answers (2)
Julie A. Barnes, CPA
Small Business Exchange, Inc.
Travis County, TX

Hello Sire,

Charles' advice is spot on - multiples of gross income do no indicate the profitability of a business. The cap rate you refer to is only as good as the data you can gather from similar operations in a comparable location - doubtful at best.

Instead - I would encourage you to approach your listing price more realistically. That is, if a buyer were to pay cash - what would be their payback period? More likely, a buyer will need to borrow some portion of the sales price. Let's use 80% of the price as an assumption. After servicing the debt, will they be able to enjoy a return of 20% or more? That's the target for most commercial loans.

For more information about how to value your business, please visit my blog: http://AustinBusinessesForSaleBlog.com.

Thanks and Good Luck!
Julie A. Barnes, President
SBX, Inc.

Jan 11, 2010
Chuck Woolweaver
FranchiseConsulting.Net
Franchise Your Business in 60 Days
Palm Beach County, FL

In Florida we don't use gross sales to determine price because it doesn't reflect the potential ROI. Instead we use adjusted net profit (owners benefit) and a multiplier based on historical industry sales data

Jan 11, 2010