Motley Fool (UK) reminds home business owners, that their activities may be more valuable than they think.
While – like most small businesses – home businesses may be especially dependent on the owner for their continued viability, you may be able to get more than you’d think if your home business has expensive assets associated with running the business.
While ordinarily you’d derive the sales price of your business by multiplying the annual profits times 4 or 5…
If your business has expensive assets, then it may be better to value the business based on those instead. For instance, an apiarist may consider his prize bees and custom-made beehives to be worth considerably more than the profits made from selling honey to local shops. In this case, the income approach may not fully justify the value of the assets. Additionally, any contracts, albeit tacit, with local shops should be included as goodwill, which is another asset.
Read more here.
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