Rules of Thumb for Company Valuation

The following data is from 2010 and it was supplied from The Reference Business Guide, published yearly by Business Brokerage Press. This is a good resource for an individual involved in buying, valuing, or selling private businesses. This guide details reasoning as well as alternative methods, other references and tips for pricing and valuing businesses. It also documents the limitations of using rules of thumb. Included here is only a selection of the businesses valued and methods shown in the guide.

 

Industry “Rule of Thumb” Valuation
Accounting Firms 100–125% of yearly revenues
Book Stores 15% of yearly sales & inventory
Bars/Taverns 40% of yearly sales & inventory
Auto Dealers (for New Cars) 0–10% of yearly sales & inventory
Coffee Shops (Gourmet) 40% of yearly sales & inventory
Dental Practices 60–65% of yearly revenues incl. inventory
Day Care Centers 45–50% of yearly sales incl. inventory
Engineering Services 40–45% of yearly revenues
Food Shops (Premiumt) 30% of yearly sales & inventory
Dry Cleaners 70–80% of yearly sales & Inventory
Flower Shops 30–35% of yearly sales & inventory
Gas Stations (w/o C-Store) 15–20% of yearly sales & inventory
Gift/Card Shops 35% of yearly sales incl. inventory
Hardware Stores 45% of yearly sales incl. inventory
Landscape Businesses 45% of yearly sales
Grocery Store (Supermarket) 15% of yearly sales & inventory
Insurance Agencies 125–150% of yearly revenues
Liquor Stores 40–45% of yearlys sales & inventory
Law Firms 90–100% of yearly revenues
Restaurants (Full Services) 30–35% of yearly sales & inventory
Restaurants (Limited)  30–40% of yearly sales & inventory
Sports Goods Stores 25% of yearly sales & inventory
Veterinary Practices 70% of yearly revenues & inventory
Travel Agencies 35–40% of yearly commissions