How much to sell a small business dance studio for

UPDATED: Oct 1, 2022

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How much to sell a small business dance studio for

Hello Im trying to sell my business not real estate
I e been told the asking price should be between 2-6
times the annual profit. Please advise if this is
accurate thank you so very much

Asked on May 29, 2018 under Business Law, New York


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

There are many ways to value a business; three of the most common are--
* based on the value of assets, both tangible (e.g. equipment) and intangible (accounts receivable, intellectual property like trademarks; 
* based on future projected revenue stream, such as if the business has long-term contract; or 
* based on profit (not revenue: the profit after costs, including payroll, are taken out), in which the sale price is a multiplier of the profit.
The last is the method you were recommended and is a particularly common one. For example, I worked in the publishing industry for many years, for a company which bought other publishing companies, and they always calculated the price by applying a multiplier to the profit. 
Manufacturing businesses, where you have physical things to sell, generally go for around 8 times proft. Professional services businesses, like law firms, often go for around 2 times, because if you lose the people (the current owners or employees) providing the services leave, much of the value leaves with them. For a dance studio, something in the range of 2 - 6 times, broadly speaking, seems appropriate.
But all the above said, all that really matters is that you and the buyer agree on a price you are both happy with. If they are willing to pay it and you are willling to accept it, that's the right price.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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