The second most weighted factor in the risk multiplier series for the Discretionary Income Multiplier Formula is business and industry growth. This factor evaluates the overall change in an industry and in particular the business under review over the most recent three years.
Calculating the Value of a Business
Calculating the value of a business requires the use of the discretionary income multiplier method. This method is commonly used to determine the value of most small businesses. If the company has revenues of less than $5,0000,000 per year, this is a great tool to determine the value of the business operation.
In the world of small business, the sale of a business is dependent on two critical elements. They are DISCRETIONARY INCOME and the BUSINESS RISK MULTIPLIER. These two elements are multiplied to create the overall value of the business operation. In general, no small business operation is worth more than three times the discretionary income.