Small Business Valuation Question

You'd likely want to compare valuations, but 1.3mm seems very low. For an established company, I couldn't imagine making back your entire investment in a year... That would make very little sense to sell.

This is a small veterinarian clinic. These aren't the actual numbers just a representation of them. I thought the owner coming asking more than he has ever made was too high. These increases in income were due to my wife improving the business.

quote:

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gross income has been: 900k, 1M, 1.1M

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Are those figures for gross income, or revenue?

what's ebitda?

what kind of assets are involved?

EBITDA is net income with interest, taxes, depreciation, and amortization added back to it, for the most part, or income before those expenses are taken out.

People like it as a comparison basis because it removes the effects of financing and accounting. It's a more raw evaluation.

On a vet clinic you'd also be buying a customer list. It is an asset, and it is depreciable.

Generally on this type of purchase you want to look up fair market values of X times both top and bottom lines, and X times EBITA. These figures might, or might not include tangible assets, but many times in professional businesses they do, predicated on total hard assets. Obviously if there is a $1MM building involved, this also adds to the equation.

It goes without saying that if possible you'd want to purchase assets, but not liabilities. Now if you worked there for years, and this was a stock buy in, you might not need to worry as much about this part. Presumably by virtue of working there, or being a junior partner, you'd have done some degree of due diligence, or at least be aware of long tailed liabilities left hanging. Presumably.

quick and dirty


assets /liabilities + 150% of yearly net

So basically you are buying the building/land (easy enough to value), inventory (very easy to value), fixed assets (a little bit harder to value), with the big part of the business being the client list and work of the employees.

I've seen some professional practices sell at 1X revenues, plus net hard asset value, plus carrying cost of inventory (prob not much)

Needless to say, before you buy anything, you need to have a building appraisal, a busieness appraisal, hire a CPA to do a foresnic review of the books, and hire an attorney to look at the legal stuff. Also, you generally want to buy the assets, not the business. Let the current owner keep the A/R, the debt, and the cash.