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how do i value my business

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Answers (1)
Bill Morkes
C-Store Xchange
Shelby County, TN

Do it based off cash flow, or net operating income (NOI).

Take your annual income after expenses (but before any debt service you may have), and divide by the CAP rate businesses like yours are trading for (if you're not sure, check out some of your competition for sale and work backwards).

For example:

Your business earns $56k per year after expenses (taxes, insurance, utilities, wages, etc).
A similar business to yours just sold for $280k, but they had an NOI of $72k per year.

Work backwards to determine the CAP: 72k/ 280k = .257 or 25.7 CAP Rate

Use that CAP to determine your business value: 56k / .257 = $218k.

Don't forget to add in inventory / equipment / other items your selling in addition to the business.

Also, if you're willing to hold financing, you'll most likely get more inquiries and command a higher selling price.

Jul 14, 2011