Does anybody know how to evaluate a small pottery studio business?
My wife has a studio that we want to sell before we move out of the state. She is the sole proprietor and I help her do the accounting, handyman tasks, web pages, clean, and assist in teaching classes. She has been in business for over 6 years and profitable for the last three. This years revenue will gross about $30K, with a net profit about $12,000. She rents about 2500 square feet, has six wheels, two kilns and the assortment of pottery equipment and glazes. The revenue comes from teaching classes, selling pots, and membership fees. Membership allows potters to use the studio for a monthly fee. The business is still growing and has the capacity to double before she out grows the space or equipment. The street value of the equipment is about $6,000. The difficult part is the soft items. Soft items like the value of the business name, the current membership enrollment, the student enrollment, and the reputation of the studio in the area (which is very good). I guess this stuff is generally called 'good will'.
One friend recommended using two methods. One is to take 1.5 times the gross revenue. Another method is to take 3 times the net income. According to these methods, the studio would be worth $36,000 to $45,000. Any suggestions or ideas would be greatly appreciated.
Thanks, husband of potter