How to Value a Small Business?

The most frequently used method in valuing a small business is Seller Discretionary Income (SDI) multiple. The SDI for the business is calculated by using the income statement and correcting it by adding back to the profit figure all perks and benefits that the owner receives from the business. Then, a multiple (generally between 1 and 2.5) is multiplied by the SDI to arrive to an approximate value. Please keep in mind that this method only gives an approximation of the asking price the seller can require for their business. The market will ultimately determine the real price as a result of supply and demand interactions. For more precise information about how to price a business for sale, please visit How to sell your business?

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