Need Opinions on Valuation

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June 27, 2021

by a searcher from Duke University in Tulsa, OK, USA

I found what appears to be a great business but the owner and I have vastly different opinions on valuation. I wanted to get group opinions on price based on the following basic information.
Service based business with business to business sales.
Very high margins, recession resistant, and appears to be poised for growth of at least 10% annually.
$400K, projected SDE for the next 12 months. 
Almost all the discretionary earnings are profit since it requires minimal equipment maintenance/investment. 
The business has minimal transfer risk and requires only minor inventory/working capital. 

Any of your thoughts on the price would be appreciated.

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Reply by a searcher
from Harvard University in Colorado Springs, CO, USA
I would add to ^redacted‌’s comment that the lower the earnings, the lower the multiple. I’d be comfortable with 2-3x on less than 500k. You have to factor in that on a business so small, the earnings are usually very dependent on the single operator and, therefore, risky.
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Reply by a searcher
from University of California, Berkeley in Las Vegas, NV, USA
Subscription to the Business Reference Guide will give benchmarking multiples across industries, SDE, etc. https://businessbrokeragepress.com/business-reference-guide/
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