It can be tricky to calculate the fair market value for buying out a food business because so many of the considerations are subjective and intangible, such as the ease or difficulty of running the business, or the relative value of the recipes and the loyalty of the customer base. However, there are certain benchmarks that enable you to calculate a fair market value for a food buyout. Once you have arrived at an objectively justifiable price, you can adjust it higher if the business includes intangible benefits as well.
Calculate the value of the business' equipment, adjusted for depreciation. If you have been depreciating your equipment for four years with the assumption that you will depreciate it for five years, add 20 percent of its value to the price of your business. If the equipment is fully depreciated but it is in decent working order, add 20 percent of what you paid for it to the asking price.
Count the inventory of ingredients and packaging materials that will be sold with the business, and calculate the cost of these items. Add this figure to the net income from the previous two years.
If the business holds a multi-year lease at below the typical market value for its location, adjust its fair market value to reflect this additional value. You can also charge more for your business if it has been operating successfully for many years, or if it is easy to run and offers some real quality of life benefits.
Calculate the food business' net profit during the previous two years by subtracting its total expenses from its gross sales. You can usually find these numbers on the Schedule C form of the business tax return. Adjust the numbers on this form if they include depreciation deductions or expenses deducted during the current year that reflect amounts that were actually spent during previous years.
评论