Basic Excess Earning Method
Basic Excess Earning Method:
(a) What is this? Using the Basic Excess Earnings Method, this calculator gives a value for a business by using a basic multiplier.
(b) What does this tell me? In theory what value your business has using this method,
(c) Why should I use it? Once EBPITD is established this calculator simply applies a multiplier. It is a simple and easy way to get an indicative value for the business. Regard this as an indicator of the value rather than an absolute value. Most businesses have a multiplier of between 2 and 5, depending on the business, market conditions and demand for the location. Wages are included on a "fair market value" for the owner or manager. The multiplier should be confirmed with you accountant or financial advisor.
(d) Caution: A business, is like anything, it all depends what someone wants to pay for it. Do not assume that this valuation will be what you will achieve at the time of sale of your business. Any decisions you make, or don't make should be with the assistance and advice of your accountant or trusted financial advisor. You use this calculator at your risk.