What are the Rules of Thumb and how do I use them?
Rules of Thumb are based on statistical analysis of actual data derived from private business sale transactions. The Rules seek to establish a reasonable range of business value by using a ratio of the selling price to some measure of business economic benefit. Typical ratios are: • Price to revenue • Price to seller’s discretionary cash flow The choice of the ratio used by each Rule of Thumb depends upon which one is a more accurate predictor of value for the specific business type. To refine the business value estimate for many business types, Rules of Thumb in ValuAdder may require that you provide additional inputs, such as: • Inventory • Furniture, fixtures and equipment • Total business tangible assets Note that the number and types of inputs required depend upon the business type you choose. For example, a Rule may automatically account for all business assets and require only that you provide the business revenue as input to estimate the business price range. For each Rule of T
