re: Considerations before purchasing a small business?

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He clearly meant earnings per share. You two are arguing over semantics and a misinterpretation there

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Flask's specialty, I've noticed his ego hits most threads about ten minutes before his posts do.

To the OP, generally I'll use a couple methods to arrive at a rough, but generally accurate, valuation, just to see if I am interested in moving forward with due diligence. If you are going to be onsite managing the business daily, 2-3 times annual net is the most it's worth as a cash flow. If you're going to be absentee, subtract the costs of a manager/management team from net, then 4-5 times is pretty much where the value will be after all the lawyers and accountants are done and reach their number. If this number seems reasonable/doable to you, proceed, if not, no need to pay all the pro's because that's roughly where the numbers should fall. Note, this is for the cash flow of the business, it doesn't include real estate. Personally, I don't really consider inventory or FF&E because those are rarely worth much on the secondary market, no matter the quality or condition - you'll only get pennies on the dollar for those.