How do you determine the value of a franchise/small business?

Question

I have been offered a job to work for a small business franchise (home inspections) and then have the option of being a partner after 2 yrs.

How do you determine a franchise's value?
Do you use today's value or the value in 2 yrs?

My concern is that my contribution will make it more valuable and thus cost me more when I have the option to buy in.

Any other suggestions along this line would be great.

Thanks.

Answer 1

I'm not sure how to determine the value if there are intangible assets, or how much of projected future sales you can count towards a valuation. But how about if you get the current value, and project a reasonable amount of growth forward for 2 years. Then agree to purchase a share based on either that projected valuation, or the actual valuation in 2 years, whichever is less?

That gives you a chance to buy in at a price that has a ceiling on it.

Answer 2

From an accounting stand point you need to calculate the companies free cash flow, that is the best determination of value.

Answer 3

well, there are many things, like the industry or the service in particular that it is catering to.
then, its future prospects, the total capital assets; liquidity of the business, et all