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Valuation of a business
Posted on 1/14/12 at 7:55 am
Posted on 1/14/12 at 7:55 am
I need some help putting value on a business. The business sells logo merchandise to companies, mainly casinos for giveaways. There are no assets (buildings, computers, etc). The main thing being sold is the book of business and the spreadsheets,etc that have been developed over the last 5 years. Annual gross sales around $1MM, with net profits running anywhere from $75-100K.
TIA
TIA
10
Posted on 1/14/12 at 8:37 am to LSUGUMBO
3 to 7 years average net revenue.
Traits that increase or decrease the value would be:
-the number of years in business with positive operating results
-the "auto pilot" factor, or the degree this business can run without you. Including what it would cost to replace you to make it run on auto pilot.
-future potential and projected net revenue
Traits that increase or decrease the value would be:
-the number of years in business with positive operating results
-the "auto pilot" factor, or the degree this business can run without you. Including what it would cost to replace you to make it run on auto pilot.
-future potential and projected net revenue
Posted on 1/14/12 at 9:32 am to LSUGUMBO
$1B. Boom, valuation creation! Next up!
Posted on 1/14/12 at 9:48 am to LSUGUMBO
Present Value of 5 to 7 Years Net Cash Flow from Operating Activities based on the Required Internal Rate of Return for the Purchaser is most commonly used.
Posted on 1/14/12 at 10:51 am to tigeryat
who would buy anything based on historical average sales?Posted on 1/14/12 at 10:58 am to Athanatos
People buy and sell small businesses all the time using historical sales to project future revenues.
The dude was looking for a quick answer on TD what his business may be worth.
Historical revenues are the starting point of any calculations.
Smart arse
The dude was looking for a quick answer on TD what his business may be worth.
Historical revenues are the starting point of any calculations.
Smart arse
This post was edited on 1/14/12 at 11:20 am
Posted on 1/14/12 at 1:53 pm to tigeryat
No they are not.
Posted on 1/14/12 at 2:14 pm to LSUGUMBO
quote:
The business sells logo merchandise to companies, mainly casinos for giveaways. There are no assets (buildings, computers, etc). The main thing being sold is the book of business and the spreadsheets,etc that have been developed over the last 5 years. Annual gross sales around $1MM, with net profits running anywhere from $75-100K.
The only thing you're really selling is goodwill, and that is difficult in this circumstance due to the fact that the existing relationships may change with a change in ownership, unless you have long-term contracts/purchase orders already in place. You should also expect everyone in the company now to have to sign a non-compete and possibly a contract to stay on board for some period of time.
May be a little easier if you're selling to an existing competitor of like business that wants to get into your market.
Posted on 1/14/12 at 2:41 pm to Athanatos
Posted on 1/14/12 at 8:47 pm to Athanatos
quote:
No they are not.
Ok, school us on how to properly determine the value of a business...waiting.
Posted on 1/14/12 at 8:52 pm to LSUGUMBO
I did acquisitions for 10 years- businesses from 10-100mm revnue- never paid more than 3x annual revenue and that was a squeaky clean very solid business with a contracted customer base.
You really should get someone who has expertise in buying and selling businesses.
There are a lot of components, and the type industry dictates a lot-
You really should get someone who has expertise in buying and selling businesses.
There are a lot of components, and the type industry dictates a lot-
Posted on 1/14/12 at 9:06 pm to ForeLSU
quote:
The only thing you're really selling is goodwill, and that is difficult in this circumstance due to the fact that the existing relationships may change with a change in ownership, unless you have long-term contracts/purchase orders already in place. You should also expect everyone in the company now to have to sign a non-compete and possibly a contract to stay on board for some period of time. May be a little easier if you're selling to an existing competitor of like business that wants to get into your market.
Yeah it's basically selling customer service. All the products that are sold have been ordered to us by the client, then we order with the distributor.
The company will hopefully be sold to the other account manager (2 people in the business, the owner/acct. mgr ad another acct mgr) so they already have most of the pertinent information to run the company, just not the full client list and the full decision-making ability.
We don't want to rake them across the coals, but we also want to get a fair amount for the business. What is being considered right now is a 20% of sales payment for either 'x' months or until they reach 'x' dollar amount to be paid every month. Since the business is already established, this shouldn't be a problem.
Posted on 1/14/12 at 9:21 pm to LSUGUMBO
quote:
The main thing being sold is the book of business and the spreadsheets,etc that have been developed over the last 5 years.
Fairly typical. I have no idea what a fair price might be without a lot more detail, but highly recommend doing everything you can to keep the current owners actively involved in the business during the transition. They built the relationships with customers and employees, and that's a big part of what you're paying for.
Honestly, your ability to navigate that transition period probably matters as much as the financials at this early stage.
ETA: Assuming you're buying, of course. If you're selling then your willingness to remain involved will and should bump up the price.
This post was edited on 1/14/12 at 9:22 pm
Posted on 1/14/12 at 9:23 pm to JWS3
:disgonnabegood:
Posted on 1/14/12 at 11:14 pm to LSUGUMBO
Sounds as though there is a lot of goodwill involved in this business which usually ends with the buyer overpaying. In these situations it's important to keep the current owner on board and vested in your success.
Posted on 1/15/12 at 3:14 am to JWS3
I hope Anth doesn't waste his time with this post. Besides, his overlords won't tolerate his nose not being buried into Excel for more than 15 minutes a day.
Yet I hope he does.
Yet I hope he does.
This post was edited on 1/15/12 at 3:16 am
Posted on 1/15/12 at 10:41 am to RemouladeSawce
This thread is full of epic lulz.
These guys must have been the I bankers that valued Angie's list.
Step 1: Valuation on sales multiples
Step 2: ????????
Step 3: Profit.
These guys must have been the I bankers that valued Angie's list.
Step 1: Valuation on sales multiples
Step 2: ????????
Step 3: Profit.
Posted on 1/15/12 at 11:09 am to LSUGUMBO
$284,309.01
Posted on 1/15/12 at 1:19 pm to Athanatos
quote:
No they are not.
Time to drop some of that mad IB valuation knowledge.Posted on 1/15/12 at 3:03 pm to TheHiddenFlask
A sales multiple is used not infrequently to value start-up tech companies who have yet to turn the corner.
Just sayin brahz.
/flame
Just sayin brahz.
/flame
This post was edited on 1/15/12 at 3:07 pm
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