If you sell your business, you may be doubtful that you would value your business (and set the price you requested) in the industry's "thumbsup rule" or as a percentage of sales.
That's why there is a bad idea and why do you need to evaluate your business based on earnings?
Industry Rule of Thumb
"Rule of Thumb" is the most common way to park the ball at the store's price. They are so general that they do not really help you in your specific case. Add the fact that most industries have multiple thumbs. For example, in the hairdressing industry I found 4 different rules on a single industry website:
• 1-year adjusted earnings.
• 4 times gross monthly sales PLUS stock.
• 25 to 35% of annual gross revenue is the PLUS inventory, equipment and inventory.
• 10-25% of annual adjusted earnings per PLUS $ 2000 station
If you have a salon and apply all four to your business, you can create 4 different values for your business  Ha the industry has a widely accepted policy, you want to use it as a starting point. But as you can see, one example of a hairdressing salon does not take into account business-unique factors such as rental, employee quality or recent earnings.
So the thumb rule is just a starting point and depending on the individual circumstances you have to set the price up or down and how it can compare with other hairdressers.
However, knowing the industry's thumb rules can be useful. Applying to your business will at least inform you of how realistic it is for pricing.
They can also help unreasonable (or uneducated) customers who make unrealistically low bids at your business. If you can show them that pricing is in line with industry standards, they can help them get started on their low-ball bidding.
What about Multiple Selling?
in some industries. For example, the most important rules of the restaurant industry are based on multiple sales. Businesses with few assets and service or sales businesses, such as insurance agencies or PR companies, often use multiple sales.
Multiple sales of sales are common practice in practice but do not deal directly with the buyer – who wants to earn money. Two companies of the same type with exactly the same amount of sales have nothing to do with profits.
So if you use a sales-based assessment because this is the industry's norm, the buyer continues to evaluate the business and profit-based price requested
Even if you're one of the lucky people who deals with all cash, the buyer is likely to lend money to someone – so not all money. In most small businesses, the owner also handles the company – in a sense, 'buying a job'. Therefore, they will pay a salary (even if they do not officially pay for themselves, they are living from the business).
Before you buy your business, you need to know that your business is doing a fair job:
1.) Make payments to your debts. 2) Pay a fair salary to make use of.) 3. Do you have any more money to re – investing in business growth
can not achieve these three things than they can not buy or lower the price or offer funding conditions that will enable them to meet the three goals.
unless you can justify the sales price with the company's earnings.
So you're a favor, and you calculate that your earnings are not based on your revenue or your thumb.
Source by sbobet