When buying a business do you offer 2 or 3 times on Net Profit or Adjusted cash flow?

Question

I am confused when making an offer to buy a business is the rule of thumb to offer 2 or 3 times on Net profit or on the cash flow which includes owner's salary?

Answer 1

With today's cheap technology, there is no reason to rely on some arbitrary rule.

project your net cash flow into the future and discount them by your minimum required rate of return. That is the max amount that you should offer.

Answer 2

It varies from situation to situation and industry to industry.