The asking price is determined using a cash flow methodology. Cash flow is the sum of net income from the business plus any non-cash expenses, non-recurring items and any seller’s personal expenses. A multi-factor multiplier is applied to the cash flow based on the condition of the business.
For this business, the projected 2021 cash flow is applied. The multiplier applied in this case is 3.5x, due to high cash flow, low employee count and the simplicity of operating and replicating the scalable business model to multiply returns.