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Q: I started a lodging referral and reservation business about 20 years ago, providing what was often the first kind of marketing for many small, new bed-and-breakfast inns.

Today the inns all have their own Web sites, and consumers looking for lodging tend to use sites like Google or Expedia rather than my kind of service. The business now brings in very little money and takes only an hour a day of my time. I don't think I can regain the lost clientele and don't see a path to new markets, either. I was recently approached by someone who might want to buy this business, but I have a difficult time putting a price on it. Suggestions?

Confused in California

A: Put this newspaper down right now. Pick up the phone. Call that potential buyer and make a deal while you've got the chance!

Seriously, this sounds like such a small and declining business that you're lucky to have someone interested. Maybe this person has fresh energy and creative ideas about how to rejuvenate the business, but clearly you don't. So it's a good time to move on.

Start by letting them make you an offer. That will help you gauge how much they want the business - an important factor in determining the value of such a marginal, offbeat kind of enterprise.

"Ask them to make an offer," said Laurel Gaumer, managing partner of Robbinex of Northern California, a business broker in San Ramon. "Then say, 'Let me have a few days to consider it.' Call a couple of business brokers. Some won't have time for such a small transaction, but some will talk to you for free."

Sometimes sellers set a price based on sales of comparable companies, like pricing a home for sale. Or they start with a "rule of thumb" formula for valuing their kind of business. But neither of those is likely to work with such an uncommon kind of venture.

"There is no rule of thumb for reservation services," said Simone Velasquez, a Florida valuation expert who works with the National Association of Certified Valuation Analysts. "There are rules of thumb for hotels and bed-and-breakfasts, but this is not one of those."

Another approach would be to look at how much net income the business generates and is likely to generate. Many business buyers seek a 25 to 30 percent return on their investment, according to Gaumer. So if this were a solid business with net income of $10,000, it might warrant a price of $30,000.

But this business is so small and shaky that such a price is very unlikely. As a home-based business with no employees, what are you really selling? And how much would it cost a buyer to obtain those things on his or her own?

In your case, a realistic price might end up being one year's worth of net income - or even less.

"What this person is probably selling are their contracts (with clients), their name and their Web site," Velasquez said. "As small an enterprise as this is, there may not be much there."

So see what this potential buyer wants to offer. Then, in addition to speaking with your accountant and possibly a business broker, consider hiring a valuation expert for an hour or two of consultation. You can find a directory of certified valuation analysts at www.nacva.com.

"It might be worth spending $250 if someone makes this person an offer and they're trying to figure out if that's the best price," Velasquez said.

Want more information? There are many Web sites that offer free rudimentary programs to estimate the value of businesses. One such site is at links.sfgate.com/ZRS. Bizbuysell, a business sale site, also offers a free valuation tool at www.bizbuysell.com.

But these tools are more useful for common businesses like hotels or gas stations than for unusual ones. And they are blunt and inexact. The actual value of a small business depends on things that don't fit into a formula - including prospects, intangible assets such as reputation and intellectual capital, whether the seller will help with the ownership transition and how much the buyer really wants that particular business.

Copyright © 2007. San Francisco Chronicle.