Legal Question in Business Law in California

Re: Determining the value of a business

There is no magic formula for determining the value

of a business. Unlike real property and cars, there

is not a recognized database of sales of similar

businesses to which one can look for comparable

transactions. Each business, especially, each small

business, is unique. You could hire an appraiser

to value the business. The appraiser would attempt

to estimate future profits, and then determine

the present value (see my web site, www.richmondlaw.com,

for an article on present value)

of those future profits, which would

be the value of the business. However, estimating

the future profits is very difficult, and the

uncertainty, itself, reduces the value of those future

profits. In fact, if the business is a service

business dependent upon its owners for success, then

it might have no value apart from those owners, at all.

Essentially, your business is worth what you're

willing to pay for it. Perhaps you and your erstwhile partner

should have an auction. That way the one who

values the business more highly will buy it from the

other one, and the seller will realize his or her

valuation of the business.

Next time, see a lawyer before entering a partnership

to have a partnership agreement drafted that will

deal with these issues before they become a problem.

Re: Determining the value of a business

Without speaking with you regarding your business I cannot even give you an estimate. There is no formula for determing the value of a business. There are many different factors that need to be taken into consideration when evaluating the fair market value of the business. If you would like help determing these factors I can be reached at 877-546-9918. The call and consultation are free. I would need to speak with you before giving any type of sound legal advice.

Sincerely,

John Hayes, Esq.

Re: Determining the value of a business

There is no law covering this, it is not really a legal question. A business is worth whatever you agree on. You might ask a CPA. There are accepted accounting methods used to appraise businesses. Perhaps the two of you might split the cost of an impendent appraiser?