How much should a viable business sell for?

I have the opportunity to buy a business as a sole trader that currently has turnover of approx £50K and net profit of approx £43K.


Its not up for sale yet but it will be soon. How much is a reasonable price to pay.


The business is in rented premises so it is just the business for sale.

How much should a viable business sell for?
There is no easy answer to your question, particularly as we have so little information about the business and what it does. Often a business may change hands for the value of one years turnover however this is certainly not a hard and fast rule. The final answer relies on profitability, payback time and ultimately what you (or someone else) is willing to pay for it. Be very careful that you know what you are getting into before parting with your money. You should employ a solicitor to handle the sale.
Reply:There is no magic formula to sell all businesses on I am afraid.





Depending on the sector there may be some tenuously agreed multiples (of, say, EBITDA) but even these can vary wildly from case to case. Just because you turnover £50k doesn't mean that the purchasor will do the same with it.





YA will not help you value a business for sale. An accountant will.
Reply:I usually start by


calculating 10 years discounted cash flow


plus the current net book value.





Then I start playing with the numbers,


taking out goodwill,


looking at my projection assumptions, etc.





It really is both a science and an art.

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