Quote:
Originally Posted by Rain Man
There are several informal methods for valuing a company. The ones I use in our own accounting are:
1. Average of the last five years of profit (Average profit per year) There's some adjustment you make, and I don't remember why, but I divide that number by 0.15 to get a value estimate. You also have to add in any salary the owner takes.
2. Average of the last five years of revenue.
3. Most recent year of revenues, plus any salary the owner takes.
4. Dividend paying ability, which is more or less the amount of total salary and profit the owner takes (in the most recent year)
I use all four and then average them since they can vary widely depending on a number of factors. These figures do not include things like the value of inventory, cash on hand, and the liability of a lease.
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these are great points and I use similar methods, but this situation is different because the business hasn't matured -- he's in the investment stage and now his partner wants to "uninvest" which, unless there were a previous agreement regard "money back" etc, there is no such thing.
Really, all this comes down to is that the OP has a conscience and would like to at least give some of that investment back. Nobel, I guess, if that's the proper way to handle it. But there is no refunds in starting a business. Not that I'm aware of, unless there was previous arrangements.