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BizSales - Business Brokers
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Determining an Offer Price for a Business
How much to offer for a business

The first thing you need to do is hire a business broker or an accountant with experince & skills in working out a market valuation, to perform a valuation. Much like property, 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.

In performing the valuation, the accountant or broker could 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!