Every April issue of the Business Values Newsletter includes a table showing the appropriate ROI percentage for a range of larger businesses. Subscribers can calculate a ballpark estimate of a business’s value using the below ROI table.
Please refer to the “How to calculate an estimate of business value using BVN price list document” in the Jarot Business Valuations online members library. BVN subscribers can also refer to the Index Sheet to find the latest article about a particular business type.
For businesses with higher profits, these can either be valued on the basis of the profit being calculated, as being run by an owner operator, or under management. For smaller businesses, the owner operator (i.e. no salary for one owner in the expenses) approach is the most appropriate. However, when profits exceed around $800,000, the preferred approach is under management (i.e. include an appropriate wage for the owner).
Whichever method for calculating the profit is used, it does not affect the price of the business. What occurs is the ROI percentage changes accordingly, so that the price is the same.