If you decide you want to buy a business you need to prepare yourself for the rather inconsistent pricing methodologies used for setting the asking prices for small businesses.
You shouldn't confuse the asking price for a business with the value of the business or what finance professionals call a Business Valuation or Business Appraisal. There are many ways to compute the value of a small business. The results can be wildly different and all correct. The issue isn't "what is a business worth?" as much as "what is the business value to you?". We'll breakdown the elements and suggest ways for you to go about the process of determining a fair value for a business.
For background it also might be helpful to read "What do you Buy when you Buy a Business?" . Also, you might want to review this Case Study How to Buy a Business - Case Study.
In this post we will discuss the elements that create small business value. As Business Brokers we have these discussions with buyers but more importantly we have the same discussions with business sellers.