Discretionary Income Multiplier Method

A tool used to determine the value of a company or small business. It incorporates the discretionary income and the risk multiplier to determine the value of the small business operation.

EBITDA – Buyer Beware (Case Study)

EBITDA

This article will illustrate the opposite effect using the same business information.   A buyer of a business should be leery of financial information and look for improper accounting processes.   The goal is to reduce the operational income and ultimately the value of the business.   The goal is to get the business valuation to a realistic number.

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Stability of Historical Earnings

Stability of Historical Earnings

No other element of the Multiply Discretionary Income Formula has as much weighted value as the historical earnings of the company.  Every knowledgeable business entrepreneur, accountant, lawyer, broker, you name them; they look for this information first.  There’s a reason for this.

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Calculating the Value of a Business – Discretionary Income Multiplier Formula

Discretionary Income Multiplier Formula

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.

This content is for Bronze, Silver, One-Time and Contractor's Diagnostic members only.
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