Determining the value of your business: recasting the income statement
Valuing your business is something you’ll need to do if you’re about to sell it off. There are several ways to value a business, but the most reliable methods are based on cash-flows rather than profits. Here’s a piece from the You’re the Boss blog in the NY Times which gives a good example of one cash flow based method. The method uses the income statement/profit & loss account as a starting point to work out what’s often termed the owners’ cash flow. This is turn is`often combined with a multiplier (e.g. a number of years) to derive a value for a business.