What is the best way to determine the asking price of an independent motel business? The motel I am looking at has an asking price of $435,000 and annual revenue of $145,000. This motel is in a very small city with a population of only 12,000 people, but the location is right off the major highway exit.
Personally, I prefer a multiple of the Owner's Benefit figure because what you ultimately can put in your pocket, and have available to service debt and build the business is really what any business owner should be concerned with when valuing any business. After all, if the business is producing solid revenues but weak profits, who cares what the revenues are?
Having said this, the various barometers are:
The Owner Benefit Calculation is a combination of:
Pre tax Profit + Owner Salary + Owner perks + Interest + Depreciation.
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