This is how to start the process:
1. Add up the purchase price of all salable inventory. If you can't sell the stuff in inventory, it has no value.
2. Add up the purchase price of all furniture--if you were to buy replacements for it--as it exists now.
3. Add up the purchase price of all computers, office machines, office supplies etc. use method in item 2.
Now you have a number that represents all the "things" in the business. You could start your own business, and purchase these "things" for that amount of money.
4. Determine the income from operations.
5. Determine the net income.
Now you have two numbers that represent the market value of your products less your expenses.
6. Determine if the number of sales transactions have increased or decreased during the last few years.
7. Determine the dollar amount of the increase/decrease.
8. Graph items 6 and 7.
9. Decide if you think the growth rate will continue, increase, or decrease, AND what you intend to do to make it increase.
10. Establish a growth percentage, and subtract inflation.
11. Apply item 10 to items 4 and 5.
12. Multiply items 4 and 5 by 5 years.
13. Add item 12 to Items 2 and 3.
Now you have a number that represents the growth of your business PLUS the cost of the "things".
14. Now, proceed with an NPV analysis.
This gives you a startign point for your future determinations only. This does not set a final price/value. With the aforementioned numbers, visit your banker.
