Nothing is more emotionally charged than deciding upon a price for an existing business. The owner has one idea of how much the business is worth, while the buyer will typically have another viewpoint. Each party is dealing from a different perspective and usually the one who is best prepared will have the most leverage when the process enters the negotiating stage. 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.