I have been developing a defensible methodology for piecing a business. There is one more refinement that I may use but I request your professional opinions as to the validity of it?
Sources for historical data (sold) about the specific type of business are: Business Reference Guide, BizBuySell “sold” data from the previous year & ValuAdder for “sold comps”.
I calculate a column of 21 averages of Fair Market Values (FMV). Next, I run the descriptive statistics on the column. I select the mean as the value that “best represents” the numbers in the column, although sometimes the median proves to be the best value. I use Quickcalc to check for outliers.
Further research reveals that a Histogram may further refine the array of values, resulting in a more accurate FMV. The input is the 21 FMVs. The 5 Number Summary bins are: the max & min values, the mean FMV & a FMV one standard deviation above & below the mean.
The question to you is, “Is this a correct assumption?”
Examples available upon request.
R. Wayne Moorhead
Moorhead Business Brokerage, LLC