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re: Anyone Have Experience With Business Valuation?
Posted on 11/19/20 at 8:42 am to topdollarbill
Posted on 11/19/20 at 8:42 am to topdollarbill
quote:
EBITDA x multiple
Agree with both of the responses so far.
To expand on this, the difficult part is going to be finding a "true" EBITDA. That is going to take determining a "market" salary for yourself at the very least but probably need to adjust for some other things as well (reasonable office expense, tech expenses) that you don't account for because they are hidden costs (work from home, probably use a computer you already had, etc.) Then you apply the multiple to that number. The big one is going to be adjusting for a reasonable salary for yourself.
Ex: You bring in $350,000 in profit but don't pay yourself a salary (or don't pay yourself a fair salary). So you think 4X values the business at $1,400,000. In reality, the market pay for people to run the business may be $150,000. So you actually apply the 4X to $200,000 (300k-150k) and the business is worth $800,000.
1
Posted on 11/19/20 at 8:49 am to yellowhammer2098
Pretty scary how almost dead on you are with your example. And to expound, in my situation, the Mitsubishi company absolutely would not incur any additional expenses to add and service my customers. The way they are set up, no one would be paid a commission on these additional sales (no one is paid now on what they currently sell to me). Now, I’m sure bonuses would be paid, but they are now anyway. So in my mind, the whole fair salary component isn’t fair to the seller (me) to be fully applied. Am I just completely off base?
This post was edited on 11/19/20 at 8:56 am
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