How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Richard - Bizlaw Your Own Question
Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 9716
Experience:  30 years of corporate, litigation and international law
Type Your Business Law Question Here...
Richard - Bizlaw is online now
A new question is answered every 9 seconds

This is not really a question on business LAW as it is on possibly

Resolved Question:

This is not really a question on business LAW as it is on possibly business accounting?
Question is: I'm in early negotiations with a small business owner in regards XXXXX XXXXX his business. Is there a proper and simplified formula I can use in order to arrive at a fair price for this business? If so, what formula would you recommend? Thanks
Submitted: 5 years ago.
Category: Business Law
Expert:  Richard - Bizlaw replied 5 years ago.
What is the nature of the business? How long has it been in business?
Customer: replied 5 years ago.
It's a small vacuum sales and repair shop. Very small floor space inside but location is excellent, high traffic area, good exposure, and has been established for over 30 yrs. but has had new ownership the past 2-3 yrs. so not sure if that helped or hurt previous business. Minimal parking as well. He only showed me records from last year and the net income was below 28K but I'm sure it can do much better. Does this info. help?
Expert:  Richard - Bizlaw replied 5 years ago.

You need to get more historical data. The most prevalent standard for purchasing a business is a discounted cash flow. You need to see historical figures to get an idea of what the trends are for the business, whether it is growing, declining or flat. Since this business does not seem equipment intensive, you might consider working off a multiple of the net income and I would use after tax income. You could pay three to four times net income. That would put the value at between $75-100K if the net income was $25K. This assumes the income is steady over the last few years. It is critical to look at those trends.


If this answer is responsive to your question, please accept it. That is how we are compensated. It would also be appreciated if you provided feed back on your view of the answer. Finally, if the answer was especially helpful you can provide a bonus. If I can be of further assistance or you have other questions in the future you can ask for me and reach me at this site.

This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.

Richard - Bizlaw and 2 other Business Law Specialists are ready to help you

Related Business Law Questions