The thumb value rule is a quick and dirty way to estimate the value of a company. The basic premise is that you multiply the business's net income by two or three. So, if a business has a net income of $100,000, the business would be valued at $200,000 to $300,000 using the thumb value rule.
There are a few different ways to use the thumb value rule. One standard method is to take the business's last twelve months of net income and multiply it by two or three. This will give you a rough estimate of what the business is worth.
Another method is to take the business's projected future net income and multiply it by two or three. This will give you a more optimistic estimate of the business's value.
The thumb value rule is not a perfect way to estimate the value of a business, but it can give you a ballpark number to work with. Getting a professional valuation is a good idea if you're considering buying or selling a business. But if you just want a quick estimate of what a business is worth, the thumb value rule can be helpful.