Keep in mind that most sellers determine the price for their business arbitrarily or through a special formula that may apply to that industry only. Either way, there usually aren't very many solid facts upon which to base their decisions. Price is a very hard element to pin down and, therefore, hard for the buyer to assess. There are a few factors that will influence price, such as economic conditions. Usually, businesses sell for a higher price when the economy is expanding, and for a much lower price during recessions.
Motivation also plays an important factor.
If the seller has many personal financial problems, you may be able to buy the business at a discount rate by playing a waiting game. On the other hand, don't ever let the seller know how badly you want to buy the business. This can affect the price you pay adversely. Beyond these factors, you can determine the value of a business using several different methods discussed below. Multipliers Simply put, some owners gauge the value of their business by using a multiplier of either the monthly gross sales, monthly gross sales plus inventory, or after-tax profits.