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Pricing a Business

By Rod Burns Aug 13

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.

Respectfully,

R. Wayne Moorhead
Moorhead Business Brokerage, LLC
Office: 913.402.6008
Cell: 816.863.3558

Categories: Seller Articles

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