You certainly can, but you should understand the pros and cons of rules of thumb before you make your decision. Here are the fundamentals:. Identify your Small Business Advantage. Rules of thumb may be easier, but considering factors such as cash flow and risk lead to a more accurate business valuation.
What are rules of thumb?
A Rule of Thumb Measure for what my Business is Worth - BDO
The next best place to find a rule of thumb is by calling a certified business appraiser. Private Equity Deal Sourcing Strategies in Improve the value of the business. The art of business valuation is and should always be 3 dimensional. The worst types of rules of thumb are sales based multiples such as 1 x annual sales income. More of your questions answered by our Experts. Despite its size and maturity, it actually exhibited a lower profit before tax percentage than its smaller counterpart, and had a considerable reliance on one or two large customers.
A Rule of Thumb Measure for what my Business is Worth
This type of historical growth rate may continue for a few more years, in which case the purchase price may in fact be reasonable. Finally, rules of thumb can lead to distorted conclusions due to one-time shortfalls or windfalls. However, although they can be useful planning tools, they are not precise business valuation methods. The best place to find them is by speaking to local business brokers that you may already work with.
And, rules of thumb usually cover large ranges. That pricing was based on a 1. Therefore, the rule of thumb caused unnecessary confusion rather than providing assistance to the client. Sign In. See next vintage swingers