Valuing a business....
Discussion
No I don't, I've not really had a need for one, being PAYE.
Was a general throw out there question really, had a brief chat to someone about a business for sale that is in the same field as I trained in. Not even talked about numbers yet, but the thought of buying has rather captured my imagination at the moment.
Was a general throw out there question really, had a brief chat to someone about a business for sale that is in the same field as I trained in. Not even talked about numbers yet, but the thought of buying has rather captured my imagination at the moment.
When I started up in business a long time ago you coud get away with 'seat of your pants' running these days it really isn't that simple. I would still suggest professional advice to provide a clear picture of any given situation for you to make a judgement. One other point about an existing business is such things as goodwill and what true value you think that has, any liabilities for its past trading history, what, if any concrete orders they may have on the books and what guarantee you have of retaining them.
Edited by BIRMA on Friday 13th April 13:31
BIRMA said:
When I started up in business a long time ago you coud get away with 'seat of your pants' running these days it really isn't that simple. I would still suggest professional advice to provide a clear picture of any given situation for you to make a judgement.
Couldn't agree more. I will take advice if I can get the wife to agree it is a good idea to take a deeper look.I just realise that he could tell me how much he wants and I'd have no idea if it was reasonable or not - but then the advice would tell me that anyway.
I am by nature a tight git and have an in-built resistance to paying professionals but regardless of expenditure I would still make that my first move. It would help you to have as much info about the business before engaging them as phone calls from them about further information tends to have a clock ticking in the background and that costs pounds per minute.
Value of any company is generally a combination of a variety of factors! A short but not exhaustive list below.
Asset owned by company (you need to be careful that it's not the owner who has the assets rather the company)
Return on capital employed (you can have a small turnover company which has little capital investment required that has a value of a large company which absorbs a lot of capital)
Cost of finance you may need
Liabilities (anything such as valid warranties/guarantees need to be considered)
How quickly you are prepared to wait to get a return on your investment (we tend to look for between 3-5 years)
It's not an area of expertise for me, but I have been involved in a few acquisitions, generally with full finance and legal support from our corporate functions, and these are the key things I have picked up.
In my experience owner drivers tend to have an unrealistic view of the value of thier business, so I would make sure you have an idea of where they think the value is before you invest any cost in exploring.
If they are serious about selling ask them to put an information pack on the company together including management accounts and previous years accounts, customers, products etc
Asset owned by company (you need to be careful that it's not the owner who has the assets rather the company)
Return on capital employed (you can have a small turnover company which has little capital investment required that has a value of a large company which absorbs a lot of capital)
Cost of finance you may need
Liabilities (anything such as valid warranties/guarantees need to be considered)
How quickly you are prepared to wait to get a return on your investment (we tend to look for between 3-5 years)
It's not an area of expertise for me, but I have been involved in a few acquisitions, generally with full finance and legal support from our corporate functions, and these are the key things I have picked up.
In my experience owner drivers tend to have an unrealistic view of the value of thier business, so I would make sure you have an idea of where they think the value is before you invest any cost in exploring.
If they are serious about selling ask them to put an information pack on the company together including management accounts and previous years accounts, customers, products etc
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