Evaluation of a Business!

If a business/company is being sold, what are the factors that one has to look for while calculating the worth of that business/company?

Do we have to calculate the revenues per month or per year ONLY?
Do we have to calculate the setup cost or assets?
Do we have to calculate the Goodwill of the company? or

Is it a combination of all 3 factors mentioned above?

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Situation - It is not being sold because of bankruptcy or because of the profits going down.
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Is the answer same for both "Brick and Mortar" and "Click and Mortar"

 

- revenues per month and year, depends on how old the site is. Newer = months, older = years
- how much it costed to build the site? It should be considered
- Do you mean reputation?

 

Is yours a brick and mortar company? I think that makes a huge difference. I was always told that it was three times the gross profits for one year.

So, for example, if my Screen printing company makes $90,000 dollars in profits for the year then I can sell it for $270,000 - so the person buying it can completely recover in three years - which is actually a pretty good deal.

 

As noted, you want to consider the income of the business and the expenses of the business primarily. If you are actually looking to buy a company, also consider if there are any problems or roadblocks faced from the previous owner. If it's an online business, you might consider things like age, web site strength and establishment (search engine rankings, traffic, etc.), Google PageRank, etc.

 

Rough starting numbers I look for when buying:

10-12 times monthly profit for an online business
2-3 times yearly profit for an offline business

But it comes down to what can be done with it and how much the profits can be increased and how fast.

Goodwill really depends on the industry. Sometimes it's worth a lot other times it is worth nothing.

 

Wow. That's very low for an online business. I know I wouldn't want to sell anything for that.

 

While considering to buy/sell online business i would prefer following points:

- Reputation of the seller, his background in online business and business profile.
- If a web site has real potential, well established and minimum risks are involved in the future, 15-20 months X monthly revenue
- SEs position of site, traffic stats from Google analytical tool, Yahoo and Google back links summary.
- Maximum time that site will take to maintain, maximum i will have to spend for its marketing etc...
- set up costs or valuable assets will be plus point

 

one good factor i consider is growth.
if situation is worst then make it profitable and then sell, or else it seriously wont fetch the right returns.

 

You should be able to take care of your business like a baby.Even in difficult times, you must use techniques to keep your cool.Bad days are never ther to stay. With this concept in mind, I think you must have the capability of managing your business, rather than depending on others to run the business. I mean, you must act as the head and not the tail while you are running a business.