Selling or Buying a Small Business/Selling the company


I'm controller of a small manufacturing company in Florida.  We generate $4-5million/year in revenues.  Certainly I am aware of the various approaches to valuing a business, but we were hoping to get a little closer to a realistic number at the outset of our thought processes, without it being known in our niche industry that we might be open to negotiation.   

Hello Art

Thank you for posting a question on All Experts.

I am not certain I understand what it is you are asking. I am guessing you are looking for a method to get an overall idea of your company's value?

A major question to ask is: are we selling as a stock sale or an asset sale? In a nutshell, a stock purchase involves buying all assets and liabilities, whereas an asset sale is only the purchase of assets.

A stock sale is typically done with serious involvement of attorneys and CPAs, and more than could be addressed here. An asset sale is much simpler and more direct. Even in an asset sale, there are many, many variables that play into the mix when finding an accurate idea of value, but the industry standard method is using a multiplier according to the type of business in question.

For most businesses, a multiplier of 2 to 3 is used in finding the value. For manufacturing, it is typically 4. I find the adjusted net of the company and multiply that figure times the multiplier to get a very general idea of value. Of course, there are so many factors to consider every situation must be looked at individually.

As you probably know, adjusted net is the magic figure in evaluating ANY business. We arrive at that figure by determining the company's net profits, and then "adding back" any expenses or discretionary earnings specific to the owners. These might include: payroll taxes on owner's salary, wages to family, autos for owner's personal use, auto repairs for owner, contributions and donations, professional services, meals and telephone expenses, etc.

In an asset sale, these are typically included:

1. FF and E
2. Leaseholds
3. Leasehold improvements
4. contract rights
5. business records
6. licenses
7. goodwill
8. covenants not to compete
9. trade secrets
10. trade names
11. telephone numbers
12. inventory and supplies
13. web sites and domain names
14. works in progress
15. cash and cash equivalents, accounts receivable, accounts payable, deposits and financial records.

I hope you find this helpful.

Thanks again,


Selling or Buying a Small Business

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Rhett Kniep, CBB


I advise others on how to value a business, how to sell a business, and how to buy a business, and give guidance on critical issues such as negotiation and growth strategies. I have knowledge and experience in real estate investing, including company entity structures and raising investment funds.


I have been a licensed agent and broker for over 12 years, selling commercial real estate, residential real estate, and businesses. I am a licensed building contractor of more than 20 years, and have both designed and built commercial and business structures, in addition to selling them.

California Association of Business Brokers, Contractor's State License Board, CA Association of Realtors, Better Business Bureau

The Contractor Investor, published by Phi Logos Publishing 2011, by Rhett Kniep (book on real estate investing for building contractors) Ezine Articles Diamond Author Blog

Certified Business Broker, California Association of Business Brokers, AA communications and am a student at Lincoln Law School in Sacramento. I have done numerous trainings over the years in real estate investing, real estate sales, and marketing.

Awards and Honors
Stormy Sebring College scholarship, Service Award Good New Rescue Mission, Film School certificate

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