valuing a business

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valuing a business
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franco

Joined: 05 Nov 2004
Posts: 113
Location: Bolton, Lancashire

Posted: Mon Jul 30, 07 7:37 pm Post subject: valuing a business
I have various online businesses and am thinking of selling one and taking a backseat. i have approached a couple of business sales agents but they seem largely in the dark on valuing a web based business. Anyone know of a formula or method for estimating their value? Thanks franco

Nick

Joined: 02 Nov 2004
Posts: 34535
Location: Hereford

Posted: Mon Jul 30, 07 7:40 pm Post subject:
Got any major assets? Anything more than 2-3 times the annual income is too much, but it will depend on what you own, of course.

franco

Joined: 05 Nov 2004
Posts: 113
Location: Bolton, Lancashire

Posted: Mon Jul 30, 07 8:09 pm Post subject:
i was thinking more on a valuation in relation to turnover. Any assets i own ie property, vehicles etc. are owned by me personally and not the companies who i charge rent to. Franco

Nick

Joined: 02 Nov 2004
Posts: 34535
Location: Hereford

Posted: Mon Jul 30, 07 8:11 pm Post subject:
Then concentrate on the bit where I said 2-3 times income. And if there are no assets for sale, what are you selling? Just the existing turnover and goodwill? Look to the lower end of the scale.

franco

Joined: 05 Nov 2004
Posts: 113
Location: Bolton, Lancashire

Posted: Mon Jul 30, 07 8:12 pm Post subject:
what are you classing as income? earnings after tax? Franco

Nick

Joined: 02 Nov 2004
Posts: 34535
Location: Hereford

Posted: Mon Jul 30, 07 8:13 pm Post subject:
No, turnover. When we've been looking at buying businesses (my work), we've been working around twice annual turnover, but these are businesses with assets. If we weren't buying the factory/offices/plant, etc, we'd have to factor that in as a cost, and reduce it from the value, I guess. It may vary between industries, and such, but I can only offer my experience.

franco

Joined: 05 Nov 2004
Posts: 113
Location: Bolton, Lancashire

Posted: Mon Jul 30, 07 8:16 pm Post subject:
It would be nice if I could sell any one of them for three times turnover any takers??! Franco

dougal

Joined: 15 Jan 2005
Posts: 7184
Location: South Kent

Posted: Mon Jul 30, 07 8:19 pm Post subject:

Nick Howe wrote:

Got any major assets?

Anything more than 2-3 times the annual income is too much, but it will depend on what you own, of course.

Franco said "web based" - so its bound to be based on turnover, and growth projections, rather than anything so 1.0 as profit or income!

I'd suggest something on the lines of a downpayment followed by a period where the seller takes a (fairly small) percentage of turnover (sales - maybe from VAT returns) rather than getting involved in the minutiae of accounting of "profit".

jema
Downsizer Moderator

Joined: 28 Oct 2004
Posts: 28146
Location: escaped from Swindon

Posted: Mon Jul 30, 07 8:21 pm Post subject:
I can't see turnover as a strict guide, profitability has to be a big factor.

Nick

Joined: 02 Nov 2004
Posts: 34535
Location: Hereford

Posted: Mon Jul 30, 07 8:22 pm Post subject:
There are no strict factors. But, you need a rule of thumb. Or six.

Rob R

Joined: 28 Oct 2004
Posts: 31902
Location: York

Posted: Tue Jul 31, 07 12:59 pm Post subject:

franco wrote:

It would be nice if I could sell any one of them for three times turnover

any takers??!

Franco

Which is

franco

Joined: 05 Nov 2004
Posts: 113
Location: Bolton, Lancashire

Posted: Tue Jul 31, 07 1:28 pm Post subject:
the turnover?

Rob R

Joined: 28 Oct 2004
Posts: 31902
Location: York

Posted: Tue Jul 31, 07 1:43 pm Post subject:
Yes, and the business(es)

Helen_A

Joined: 26 Jan 2005
Posts: 1548
Location: MK, Bucks.

Posted: Tue Jul 31, 07 3:06 pm Post subject:

Web based businesses in the WAHM community, that are trading well, generally change hands for 1.5 to 3 times turnover plus the cost of any stock or equipment that is going as well.

For that you get sole title, transferal of any owned domains (and those where the domain isn't owned outright are generally worth less), transfer of the complete customer database and all sales info for the last 3 years (if old enough), all the information on where fabrics and other services have been bought from, other suppliers to that business, transfer of 'goodwill' and introductions and references to those suppliers etc.

You need to price with at least 12m of loss for the new owner in mind (if its a single person run business currently without staff, or if you aren't transferring staff) as well. If only to be fair, as in my experience you generally end up spending the purchase price again in the first 24 months on getting yourself stocked and up and running again (eek at my first quotes from a couple of potential manufacturers, I can see why the sector I'm in is fleeing to turkey for its sewing!)

Care to divulge (by PM if you prefer) what you are proposing to sell? I know of some peeps who are looking for 'first footwork done' businesses atm...

Helen_A

Green Man

Joined: 23 Jul 2006
Posts: 5272
Location: Rural Scotland.

Posted: Tue Jul 31, 07 3:52 pm Post subject:
Hotels and Pubs are generaly are valued at 1 x annual turnover. That includes the premises. Many country house hotels are being readily bought up to be returned to homes again. Anne Gloag (Stagecoach) has done that several times this is her latest https://www.thruthelinks.com/kinfauns%20castle.htm

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