valuing a small business
Discussion
We've been running a small airport transfer company now for 18 months, and I've had a few enquiries from both our own staff and external people about investing in the business.
This certainly appeals as it would be nice to raise some capital to expand the business and also release a few pounds to add to my own finances. as well as the possibility of gaining some useful business partners and with the staff tie good staff members to the business with a stake in it.
my question is though, how do you value a startup business ?
our turnover was over 200k last year and projecting around 400k this year. with steady growth expected to continue. we're breaking even but deliberately not aiming to make a profit at the moment, cash going into advertising relevant equipment etc etc realistically I would say our profit margin is around 5% on turnover. although staff are paid well and make a good living, (I currently drive with the company and take the appropriate wage for doing so as do several interested investors.
can anyone suggest what I should be considering when valuing the business? other than what each person brings with them.
This certainly appeals as it would be nice to raise some capital to expand the business and also release a few pounds to add to my own finances. as well as the possibility of gaining some useful business partners and with the staff tie good staff members to the business with a stake in it.
my question is though, how do you value a startup business ?
our turnover was over 200k last year and projecting around 400k this year. with steady growth expected to continue. we're breaking even but deliberately not aiming to make a profit at the moment, cash going into advertising relevant equipment etc etc realistically I would say our profit margin is around 5% on turnover. although staff are paid well and make a good living, (I currently drive with the company and take the appropriate wage for doing so as do several interested investors.
can anyone suggest what I should be considering when valuing the business? other than what each person brings with them.
I've been in a similar position myself. At the stage your business is at, it's more a case of establishing what you need rather than what it's worth; which is technically 'nothing', really.
It would be worth spending some time to develop a growth plan with an end goal. So, for example, say you want to exit (sell the business) in 10 years, establish what level the business needs to be at at then to make that a possibility and then work our what you need to do to get to that point. You can then establish the investment needed now to start that process off and use this to determine the number of shares and their value that you can sell to interested investors.
Everything should be formalised. An informal process of mates and employees chucking in a few quid never works.
And make absolutely certain that your ownership of the business is completely ring-fenced. Everything is all lovely and nice at the beginning when the amounts are modest but when proper money starts to flow, things change and without due care, you can easily find you ousted from your own company. You don't need to to click back through many pages here to find examples of this.
I would also explore other sources of funding other than private investors. The latter carries with it certain risks. What if you have to sack one of your employees who also happened to have invested £10k in the company? There are ways you can cover yourself for such an eventuality but either way, there is a risk attached so explore the options first.
HTH and good luck.
It would be worth spending some time to develop a growth plan with an end goal. So, for example, say you want to exit (sell the business) in 10 years, establish what level the business needs to be at at then to make that a possibility and then work our what you need to do to get to that point. You can then establish the investment needed now to start that process off and use this to determine the number of shares and their value that you can sell to interested investors.
Everything should be formalised. An informal process of mates and employees chucking in a few quid never works.
And make absolutely certain that your ownership of the business is completely ring-fenced. Everything is all lovely and nice at the beginning when the amounts are modest but when proper money starts to flow, things change and without due care, you can easily find you ousted from your own company. You don't need to to click back through many pages here to find examples of this.
I would also explore other sources of funding other than private investors. The latter carries with it certain risks. What if you have to sack one of your employees who also happened to have invested £10k in the company? There are ways you can cover yourself for such an eventuality but either way, there is a risk attached so explore the options first.
HTH and good luck.
Edited by StevieBee on Wednesday 4th July 10:39
Gassing Station | Business | Top of Page | What's New | My Stuff