**I can't find much on buying a business and valuation, so let me know if there's a different place I should be posting this**

I am buying a small medical testing company.

I am trying to come up with a valuation for the company and here's our best formula so far:

(5 year average Net- Owner Salary)* Factor of 1.7

Owner Salary= a market appropriate estimation of the cost to run the business.

All contracts are non-binding.

Is this a good starting estimate? Any input?
 
I just saw your note. As indicated in the prior post valuing a business analytically does come down to a few important points.

1. Historical Cash Flow (Profit before depreciation and non-cash expenses)
2. Future expected cash flow (history can weigh more).
3. Other comparable businesses that have been sold
4. What factor to use in your case you are using 1.7. I don't have enough informationt discern the reasonableness of the factor.
5. Historical Owner compensation (this is not an estimate its actual compensation)
6. Industry (hot industries like some in technology can have high factors also called multipliers)
With 5 years of history that is good as it shows it's not a brand new company.

I am confused though about your comment about not having a lot of information on the valuation of small businesses on the internet. I'm not sure how you are searching but there is a ton (a lifetimes worth) of information on valuing a business.

To your continued success on the next level
I consult with business brokers on financial matters.
Nexlevelbusiness.com
 
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