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> Sale price: $598,000 (2.4x annual earnings) Also confused here, the math doesn’t seem to be mathing up
by andrethegiant 2y ago
> Sale price: $598,000 (2.4x annual earnings)
Also confused here, the math doesn’t seem to be mathing up
- runako 2y agoRevenue is $1m. Earnings are less than revenue, because you have to pay for salaries & stuff to generate the $1m in revenue. After expenses of ~$750k, the business earned roughly $250k in profit. Thats' real money the owner(s) could put into their personal accounts. Businesses are typically valued as a multiple of their earnings (in the stock market, this is the P/E ratio). For hardware/e-commerce companies, 2.4x is in the range of fair value. Again, you multiply by the earnings and not the revenue. That gives you the actual sale price.