How do I determine how much to sell my business for?

We are stocking distributors of industrial maintenance supplies. We sell to manufacturing plants, colleges, hospitals, heavy equipment repair shops and car dealers. We have an established account base we sell to monthly and open new accounts to cover normal attrition. Our annual sales is approximately $165,000 with a gross profit of approximately $100,000.

Brad Sugars answered February 17, 2009|

Comment

Usually you can determine this by multiplying the EBITDA (Earnings Before Interest Taxes, Depreciation and Amortization) by a multiple for your industry.

Typically, for most businesses of this kind, that multiple is 2 times the EBITDA, dependent on how much time the new owner will need to spend in the business.

If it is a turn key-type operation, that multiple may be 5 times to 10 times the EBITDA, depending on how the new owner can leverage current operations.

Regardless, a good CPA can help you with the valuation, as well as a business broker should you decide to go in that direction.

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Brad Sugars

Brad Sugars is the founder and chairman of ActionCOACH. As an entrepreneur, author and business coach, he has owned and operated more than two dozen companies including his main company, ActionCOACH, which has more than 1,000 offices in 34 countries.