The owner's asking price is equal to the profit he made last year. Keep in mind that formulas are still only ballpark estimates.
Many service businesses sell for much more than one times the owner's net profit.
For this exercise, we'll assume the owner is working full-time in the business. OK, do the math. In my experience, most typical small businesses sell for between 1.5 and 2.5 times that number you just crunched, which is actually the total cash flow of the business. All rights reserved.