When you buy an existing business, you are assuming responsibility for an existing customer base. You are most concerned with the ability of the business to continue earning profits. The price you choose to pay for this business, therefore, is more related to the business' past profit earning record. One commonly accepted way of evaluating the business is projecting its profits for the next three years based on its last three years and discounting the present value (using present value tables) to this year. This is assuming that you expect to get your investment back within three years. You.
