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, a three-year average cash flow is applied making the business price more favorable to the buyer. The multiplier applied in this case is 1.85x, below the market in favor of the buyer.