There are many companies (both large and small) that are closing lately. Many of them just simply have run out of capital. This creates a great buying opportunity for entrepreneurs. So, how do you determine the value of a business that you want to purchase? Here’s a simple formula that can help:
Take the Net taxable profit (minus the cost of a manager if the business is owner-operated) divided by .20. This will give a value which lends a 20 percent return on capital. With small business risk, this is a fair return.
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