Your true net profit is the number that potential buyers will want to know.

Susie Pemberton, Centralia, Mo.
I live in a small town and own a child care facility. My gross income in 2008 was $126,134. Someone’s interested in buying it, and they’re waiting for me to give them a price. I understand that I need to “adjust” my expense report for 2008, but I’m not sure what to use for a multiplier. I’ve been in business for six years, and can see room for expansion in the future. How do I name my price?

By Lenora Chu, CNNMoney.com contributing writer
Valuing a business is not an exact science. Many factors come into play when you're determining an appropriate selling price.

At its simplest, that price will be based on the economic benefit the business is expected to generate for the new owner.

Start your calculation by determining the “seller’s discretionary cash flow,” (SDCF), or true net profit.

To arrive at this number, examine your 2008 accounting records to pinpoint your net income, says Terry Monroe, president of the St. Louis brokerage firm American Business Brokers.

To that number, you should add back any personal expenses such as your cell phone, health insurance and travel costs, Monroe says. The new owner may not choose to pay for such things out of the business cash flow. Including them artificially lowers your business's apparent income, and therefore your selling price.

To put some numbers to the calculation, say you have a business that generates $140,000 in gross income. Your cost of goods was $40,000. That means your gross income before expenses is $100,000.

Then, subtract your expenses. Say you have utilities, payroll, taxes, insurance and advertising costs of $65,000. Personal expenses covered by the business, such as a car payment, health insurance, and travel costs, added another $15,000. For such a business, total expenses would be $80,000.

That leaves a net income of $20,000. But adding back the $15,000 in flexible expenses brings the business's discretionary cash flow, the true net profit, up to $35,000.

Once you’ve arrived at the SDCF, you’ll need to determine an appropriate multiplier to arrive at your business's valuation.

Multipliers vary widely for small companies. Factors include the economic issues affecting your industry, the size of your business, how long you’ve been around, and any risks the buyer might face, says Mark Gottlieb of MSG, a Great Neck, N.Y., accounting firm that specializes in business valuations.

An appropriate multiplier for your industry will likely fall between 1.0 and 2.5, according to Monroe and Gottlieb's estimates.

Thus, an appropriate selling price would be the SDCF times this multiplier.

With an SDCF of $35,000 and a multiplier of 2, a reasonable selling price would be $70,000.

You’ll also want to tack onto the selling price the used value of any physical assets of the business, such as furniture or playground equipment, says Monroe.

If you're serious about selling, the best first step is to consult with a business broker or investment bank to evaluate the specifics of your business and determine an appropriate multiplier.

Give us your advice: Check out recent “Ask & Answer” questions.

Finding the best broker for your business

Selling out and shutting down

To rent out empty rooms, turn to local media and Craigslist.

Sherri Birdsall, Gensis Medical Education Consultants, Orange, Calif.
I work for a business that teaches continuing-education courses for nurses in Orange, Calif. Most of our classes are conducted on weekends, which means two beautiful classrooms sit completely unused most of the week. I’d like to rent them out to bring in extra money. Any suggestions on where to start?

By Kathleen Ryan O’Connor, Fortune Small Business contributor
Dear Sherri: If you’re planning on playing the role of part-time landlord, you might be tempted to contact a professional for help. But Adam Brett, a realtor with RE/MAX NOC in Fullerton, Calif., says that if the space you’re renting is small, you’re best off doing it on your own.

Instead of trying to discern who might need an empty classroom during the week, put the word out and let renters find you. Posting the opportunity in local media outlets and community forums will help you cast a wide net for tenants. You should also consider putting up fliers at gathering places such as the public library.

If you decide to go the newspaper route, contact the Foothills Sentry, a biweekly newspaper that publishes exclusively in your area and sells space for advertisements. A good-sized display ad costs just $17, while a straight classified posting costs $5 per line. The publication goes out to about 45,000 single-family homes.

Another option is the Orange County Register, a large daily newspaper. The Register has a much greater reach than the Foothills Sentry – the average weekday circulation is about 250,000 copies – but all those extra eyeballs will cost you. A five-line classified ad that runs once on Sunday and online all week goes for $119, or $160 for two days.

Newspapers and libraries are good forums for advertising rental space, but your best option, says Brett, could be Craigslist. Posting an ad in the “office/commercial” section of the site, which is listed under “housing,” is completely free. Brett also advises you to look for other posters on the site who are trying to rent similar properties (you can enter terms such as “classroom” in the search space to find these ads). E-mail them to see if they’ve had to turn away any interested parties, and ask them to pass along your contact information. Many Craigslisters would be happy to help.

While California real estate is still taking a hit, “the lease market remains very strong,” says Brett. With a small amount of effort, you stand a good chance of finding a tenant who’s looking for a classroom of his or her own.

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Switching personal assets to business assets

Real estate survival guide

Entrepreneurs profiting from real estate

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