One of, if not the most important, considerations of buying out a business partner is determining how much the buyout is worth. You must arrive at a fair and agreed-upon price for a successful buyout. There are three essential components of determining the buyout price.nnDetermine the Partner's EquitynnYour business partner's equity stake refers to the percentage of the company they own. Many partnerships are simple 50/50 splits where both partners invest equal money, time, and energy. However, throughout the business, equity could shift. For example, if a business partner's expertise is vital to business operations, they might be able to claim higher equity.nnBusiness ValuationnnThe next step is determining how much the business is worth. The best way to do this is to get an independent business valuation. Contacting a certified business valuation expert for this process would be best, but you can also use an uncertified independent valuation expert.nnThe valuation process determines a fair market value for your company by analyzing all tangible and intangible assets. It considers expected profits, sales, revenue, equipment, market share, and all partners' creative and operational contributions.nnBusiness valuations typically use or more of several appraisal methods to determine the company's value:nnAdjusted Net Asset Method.nCapitalization of Cash Flow Method.nDiscounted Cash Flow Method.nMarket-Based Valuation Method.nSeller's Discretionary Earnings Method.nBusiness Partnership Buyout FormulannOnce you've defined the partner's equity and the business's value, you can apply the partnership buyout formula to determine the price. The formula is:nnPartnership's Equity x Business Value = Buyout AmountnnExample: Partner A owns 35% of the company, which was appraised at $1.5 million.nn35% x $1.5 million = $525,000. Partner B must pay Partner A $525,000 for a full buyout.