Good afternoon! I am considering purchasing a business, but I need to understand how to properly evaluate it. The company sells various accessories for clothing. 90% of sales come from its own online store, and another 10% from retailers. The company has a very clear niche and is fairly well-known within it. It has been in existence for about 10 years. I see a lot of potential in it, but unfortunately, or fortunately for me, it hasn’t been managed actively for the past two years, and sales have significantly dropped. The SDE for the past years looks as follows: in the last 12 months $240,000, -1 year $200,000, -2 years $550,000, -3 years $600,000.

The owner has listed the business for sale at appx. 3 times the SDE relative to the second year - $1,550,000. I don’t see that valuation, but as I said, the company does have potential. I plan to use SBA financing, so I need to determine a fair value for both the SBA and myself. So far, I estimate it based on the last 3 years, or approximately $975,000. I would like to hear your opinion.

Thanks!