A small business should be worth at least three times it's annual net profit is this the common rule of thumb for determining the value during the acquisition of a small business.
Annual profit includes all profits i.e. operating profit, own production, finished product inventory, tax revenue, government subsidy, and financial revenue in the income statement before the annual contribution margin. Total expenses represent all expenses – the cost of goods sold, operating expenses, income taxes, interest expense on loans and liabilities, amortization of fixed assets, and SG&A (selling, general and administrative expenses)
Annual net income is Income statement of the company in the deduction of overhead costs, expenses, depreciation, fees, and accruals.
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