Do rules of thumb have a place in today’s appraisals?
Abstract: Rules of thumb are mathematical formulas designed to gauge value. Some business brokers, company owners and trade associations may propagate these rules of thumb as convenient yardsticks for estimating a company’s value. But do such rules of thumb have a place in today’s business appraisals? This article shows that they do, but explains why they should never be used as a sole valuation method. And a sidebar notes that using oversimplified rules of thumb differs from applying the market approach to value a business.