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All Business:

The first thing you need to do is hire an accountant or a business broker with good accounting skills to perform a valuation. Much like real estate, you need to have some comparables. Research how much similar businesses have sold for, or might sell for, in your area. A good local business broker may already have this information.

You should also get at least a general idea of the annual revenue, and perhaps even profits, of the company. There are services out there that help you get this type of financial data on businesses that are for sale; one such company is called BizBuySell.com.

In performing the valuation, the accountant or broker would apply a “multiple” (common to your industry) to either the revenues or to the profits to determine the value. You would then establish a purchase price based on the comparables and the valuation. This is the information you or your broker would present to the current owner to back up your offer. The rest is negotiable from that point on!

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Originally posted by Dane Carlson on July 27, 2005 in Ideas.

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