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

If the problem of too many owners is killing the business, it's time to restructure.

Kelli, Bishop, Calif.
How hard is it to split a family business? A mother and three siblings each own 20% of the business but the siblings don’t get along at all.

By Emily Maltby, CNNMoney.com staff writer
First, decide if you are splitting the business solely as an asset or as a tool to seek revenge.

“If it’s the former, it’s much simpler," says Ted Clark, executive director of the Northeastern University Center for Family Business. "As an asset, you need to engage a marketing and research company to create the greatest value, and then sell and split the money. But unfortunately, it usually doesn’t work like that, because the families are emotionally attached to it and want something more than just the money.”

For example, one sibling may feel entitled to more than 20%. Another may not want to sell the company at all but sees it as the only solution to the family conflict. For everyone to come away happy, there needs to be a mediator.

“Try to get a third party to open the lines of communication,” suggests Clark. “Find a professional who everyone can agree is neutral so that no one feels that party has favorites.”

Small business center mediators are trained to get to the bottom of the family problems and keep the mistrust among siblings at bay.

When picking your outside referee, evaluate how well she understands your specific industry and your region. A CPA or valuation expert can help put a price tag on your company, but you'll need someone who is familiar with your industry and region and who can accurately assess your assets, cash flow, branding and local competition.

After you have a valuation in hand, you'll have two options, says David Goad, President of Succession Planning Consultants.

The first is the internal model, where certain current owners stay in management and run the business. In this case, it's best for those members to buy out the other members, using the valuation set by an outside professional.

The second, external model, is useful when none of the current members want to work in business anymore. That means putting the business up for sale to an investor or a competitor. This is a good time to get a business broker involved.

Keep in mind that many business sales deals carried out through payments on an installment note, rather than a cash buyout. If you decide to go with an internal arrangement, keeping some of the family members with the company, Goad recommends talking to your accountant about integrating a "self-canceling installment note" (SCIN) into the deal. SCIN is an arrangement used in many family business situations because it allows the deal to be cancelable at the death of the payee.

"The entire balance due becomes forgivable and no further payments are due to the seller's heirs or estate. Also, when properly planned, neither the value of the business or promissory note is subject to estate tax at the seller's death," says Goad.

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

Selling out and shutting down

Selling your business and keeping the gains

Who gets the name in a business custody battle?

How to keep your retirement savings on track when you're out on your own.

Joe Vitale, New York City
I recently left a staff job and am working as a freelancer. I’d like some advice on how to best manage my bookkeeping. Do you have any recommendations on interest-bearing checking accounts that I can link with an account to set up a retirement savings plan such as a SEP?

By Myrlande Davermann, Fortune Small Business contributor
A good bookkeeping program is essential when you're running your own shop. Susan Lee, a tax consultant and financial planner with Freelance Taxation recommends Intuit's (INTU) QuickBooks, a popular choice for small businesses.

For a checking account, check out brokerages such as Charles Schwab. It offers interest-bearing accounts that have automatic withdrawal options for funding different retirement plans.

But approach automatic withdrawals with caution: Lee warns that the first year of freelancing rarely goes smoothly. Income might not come in as regularly as you expect. Lee recommends underfunding your retirement account and setting aside the extra cash in a separate account. That way, it will be available if you need it. When you do your taxes at the end of the year, you can figure out what you can afford and sock the money away.

A SEP-IRA, which stands for Simplified Employee Pension Individual Retirement Account, will allow you to contribute up to 20% of your net self-employment income into your retirement account, up to a maximum of $46,000. If you have a lot of cash you want to tuck away for retirement, another option worth investigating is the solo 401(k), which will let you make contributions both as an employer and as an employee (of yourself).

If you don't have inventory or complex business arrangements, another software program that could fit your needs is Quicken, says CPA Terry L. Jones. She recommends you seek out tax and accounting assistance from a qualified CPA with experience working with to working with freelancers.

"This is a specialized area, and you need a good advisor on your team," Jones says.

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

Related links:

The Ultimate Guide to Retirement

Resources to help your company grow

Costs soaring? Overhaul your business

Setting competitive fees for your business

Should a buyer pay more for a building if selling it would mark the end of the owner's business?

Michael, Salem, Ore.
Dear FSB: My parents have a small business and own the building in which it operates. The person next door would like to expand by buying my parents' building, and keeps asking them for a price at which they would sell. My Dad would like to retire if they sold it, and would lose the income from the business. Two questions: Should the person pay a premium because he needs the building to expand? (Supply and demand, right?) And second, should the value of the business itself be added to the asking price, since he would be putting my Dad out of business?
By Katie Ryan O'Connor, Fortune Small Business contributor
Dear Michael: You are right in assuming supply and demand are at work here, but perhaps not exactly in the way you think.

“Of course, you can set the market value of the property at any price you want, for any reason you want,” says Brad Meyer, president and CEO of Dallas-based Trinity Real Estate Solutions, a nationwide real-estate inspection firm. “But prospective buyers will be evaluating it from various perspectives too: location, ease of access, expansion room, signage exposure, age, maintenance, income potential, area property sales, size of lot, potential hazards (flood, fire, etc.), to name a few.”

The factors that might mean a lot to you – such as making sure your Dad has a well-funded retirement – aren't going to hold a lot of sway with buyers. So be sure to separate your emotions from the market.

“Many sellers have a strong emotional attachment to their property. They believe it is worth more than market value,” Meyer says.

That point is echoed by Gary Grudnitski, a professor of accountancy at San Diego State University with real-estate valuation experience.

A potential buyer isn't going to respond to the fact Dad is retiring in the same way you would, for obvious reasons. “After all,” Grudnitski says, “[Dad] is not precluded from working elsewhere” just because he sells the business.

Your best bargaining chip seems to be with the expansion possibilities the property offers the buyer next door.

“Typically when you are talking about a commercial property, you are talking about what that property will return based on its usage,” says Grudnitski. “If it means they will just have to knock down walls rather than move their whole business premises, I would bargain hard for that. From the buyer's standpoint, this is much different from moving somewhere brand new.”

Meyer recommends you seek a qualified property appraiser or commercial broker. They can conduct a "broker opinion of value" (a detailed assessment of a property's market value, given the economic characteristics of the property and the prevailing trends in the marketplace) and provide an objective opinion on the property.

The Appraisal Institute offers links to expert local appraisers on its website, says Leslie Sellers, vice president of the Chicago-based organization, who recommends you also seek an “investment value” analysis of the property which, more than market value, will take into account some of the relevant intangibles, such as the benefits to the adjoining owner.

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

Related links:

What's your business worth – really?

How to value the worth of your business

Mistakes to avoid in selling your business

Sell your business for the highest price

Finding the best broker for your business

Sammie wants to know how to set up a 401k. Do you have thoughts to share on this process? Let us know!