Spanning my 30+ years of experience in buying and selling small businesses, both for myself and for others, (my firm has successfully sold hundreds of small businesses), I have come to the conclusion that basing the value of a business more on the industry than the economics of the specific business is a folly. My White Paper (click here An Alternative Approach to Valuing a Small Business to download) will explain in more detail why I believe an economic approach to business valuation makes much more sense than applying an arbitrary “multiple of discretionary earnings” rule of thumb to determine the value of a small business. In a nutshell, the value of a future income stream should not be determined by the specific industry a business is in rather than the actual quality of the income subject to specific business factors and risk.
