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Valuing a Business
Posted on 10/22/13 at 11:04 pm
Posted on 10/22/13 at 11:04 pm
I'm looking into buying a certain niche business with contracts in place. If you are buying a business what are the biggest questions you are looking to have answered or even the smallest? Any good links?
Thanks
Thanks
3
Posted on 10/22/13 at 11:12 pm to Hoyas
The strength of those contracts and any outstanding liabilities
Posted on 10/22/13 at 11:16 pm to boosiebadazz
Contracts will mitigate the downside risk; in valuing the equity you need to think about where the upside is. Consider what opportunities are out there to gain new contracts and how much cash they'll bring in.
Posted on 10/22/13 at 11:21 pm to raw dog
quote:
Contracts will mitigate the downside risk; in valuing the equity you need to think about where the upside is. Consider what opportunities are out there to gain new contracts and how much cash they'll bring in.
It's significant as the seller has inside track on next contract. I estimate with these contracts there is a reach of over 1 million people. There is tremendous upside within the next 6-12 months. This is why I would keep him on board to secure the 3rd major contract.
This post was edited on 10/22/13 at 11:34 pm
Posted on 10/22/13 at 11:23 pm to boosiebadazz
quote:
The strength of those contracts and any outstanding liabilities
The strength of these contracts are damn strong as the service side of his business is ranked in the top 3 in the country. Liability is a good question.
Posted on 10/23/13 at 6:51 am to Hoyas
When you stare using words like a million customers and 3rd in the country it is time to hire someone to help in valuing it...
Posted on 10/23/13 at 8:29 am to Hoyas
Future contracts and present liabilities would be relatively easy to predict and forecast. I'd just be nervous about some random liability coming out of nowhere and fricking up cashflow or something.
Some of this is hard to answer without knowing the specific industry, but I understand if you don't want to reveal that much.
Some of this is hard to answer without knowing the specific industry, but I understand if you don't want to reveal that much.
Posted on 10/23/13 at 8:39 am to Hoyas
quote:
If you are buying a business what are the biggest questions you are looking to have answered or even the smallest?
If you are looking at physical plant and property, do not underestimate the possible negative impact of pollution or contamination exposure.
If there is any pollution there, the owner is responsible for cleanup, whether he put it there or not. This could be very significant for any type of manufacturing business.
Posted on 10/23/13 at 8:53 am to poule deau
Alot of factors to consider, I do BV for a living.
Here are a few:
-With contracts - consider the duration, renewal - compt.& personal relationships.
-Look at the books - trends and what is he running through the business that would be personal
-Consider what the value would be if they guy you plan on keeping on leaves and starts his own line of business? What's stopping him?
- consider if you are buying assets or stock of the company - has tax implications
-Look at the industry - trends
Just a few considerations
Here are a few:
-With contracts - consider the duration, renewal - compt.& personal relationships.
-Look at the books - trends and what is he running through the business that would be personal
-Consider what the value would be if they guy you plan on keeping on leaves and starts his own line of business? What's stopping him?
- consider if you are buying assets or stock of the company - has tax implications
-Look at the industry - trends
Just a few considerations
Posted on 10/23/13 at 9:57 am to Hoyas
A big question for me would be do these big contracts pay and do they pay in time
Posted on 10/23/13 at 1:51 pm to reb13
Hire the Goldman Sachs.
Posted on 10/23/13 at 5:58 pm to Mako
You should also consider what type of business entity you will want to operate the business as going forward, and your exit strategy. These can dictate how you structure the transaction. The structure of the transaction can have serious tax implications for the seller that will alter his price expectations.
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