To determine the multiplier of the industry of the business you're buying, contact your trade association or consult the services of a business appraiser. It is, however, difficult to substantiate multipliers. It can be a random number that may not truly reflect industry realities. Since it deals with average values, the formula does not take into account the differences of businesses within the industry. If a seller uses this approach, use the value only as an estimate but do not rely too much on it.
Some businesses are worth no more than the value of their tangible assets.
If a company is asset-intensive, such as retail businesses and manufacturing companies, you can use the asset valuation method. The goal of the seller in using this approach is to get the best possible price for their equipment, inventory, and other assets of the business. This method of valuation is suitable for service companies and other non-asset intensive businesses. This method places no value on fixed assets such as equipment, and takes into account a greater number of intangibles. This valuation method is best used for non-asset intensive businesses like service companies.