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Rules of thumb may be easier, but considering factors such as cash flow and risk lead to a more accurate business valuation.[/caption]
From time to time, I receive a call from someone who wants me to tell them the value of a business that they want to buy or sell. They provide a few items of information, such as last year’s sales or net income and expect that I will apply a multiple to quickly and easily come up with a value*.
What they are asking me to do is apply a rule of thumb.