Really helpful perspective, appreciate the reply and hearing both sides of this valuation debateVery much disagree. If the owner wants to retire, he can either try to find a buyer or just auction off the equipment. Most end up going with the auctioneer. If I were buying a contract machining business, I would pay the current value of the equipment less 20% plus 1x net yearly profit. That would probably come out to about a million bucks for this deal depending on the equipment. The deal would be contingent on seller financing over 5 years at 0% interest and the owner staying on nominally as an advisor for at least 2 years. If he is retiring, it is better for him to get the money over several years anyway to avoid higher taxes. This is a very generous offer since the alternative is trying his luck at the auction block.