Valuation of business
Discussion
Usually you take profit ( EBITDA) and then use a multiplier based on our sector, growth, and business plan. I would suggest 4 or 5 would be ok for you.
So if EBITDA is 50k pa x 4 = 200k sale price. Job done. Obviously though at the end of the day it is down to what the seller will sell at and what the buyer will pay.
So if EBITDA is 50k pa x 4 = 200k sale price. Job done. Obviously though at the end of the day it is down to what the seller will sell at and what the buyer will pay.
So, you have £700 a week profit. £35k a year.
However, do yourself and your partner both work full time? If you or they are going then you would need another staff member, so reduce that profit by that.
Based upon that, it is maybe earning you not much more than a non-owner's job would be somewhere else, but with the ownership risks.
As such it is not going to be hugely, hugely valuable to either of you. Getting much more accurate than that is difficult, and there is a more pertinent issue in that its true worth is what one or other of you is willing to pay the other for it!
You can do that by an 'auction' or sealed bids to your solicitor.
However, do yourself and your partner both work full time? If you or they are going then you would need another staff member, so reduce that profit by that.
Based upon that, it is maybe earning you not much more than a non-owner's job would be somewhere else, but with the ownership risks.
As such it is not going to be hugely, hugely valuable to either of you. Getting much more accurate than that is difficult, and there is a more pertinent issue in that its true worth is what one or other of you is willing to pay the other for it!
You can do that by an 'auction' or sealed bids to your solicitor.
Based on your figures - you are left with £36,400 per year but you then have to pay yourself and your partner out of this amount?
In terms of trying to value it, it's not straight forward, can you grow the business anymore at all or expand it in the future?
Can you adjust prices any futher?
Factor this stuff in as well- but in terms of a figure - it depends on who is purchasing it but based on those numbers a couple of grand is all it's worth IMHO.
In terms of trying to value it, it's not straight forward, can you grow the business anymore at all or expand it in the future?
Can you adjust prices any futher?
Factor this stuff in as well- but in terms of a figure - it depends on who is purchasing it but based on those numbers a couple of grand is all it's worth IMHO.
scruffy101 said:
Yes my partner and I take our money out of that so there is very little profit left,I just do not know what amount to offer him.We have a business loan of £4000 to pay off as well.For one boss it will be good but not enough for two partners.
Whatever you do, don't offer any silly money, that would be madness. The business is not earning enough.If you do sell up, do you have a job to go to??.......
scruffy101 said:
Yes my partner and I take our money out of that so there is very little profit left,I just do not know what amount to offer him.We have a business loan of £4000 to pay off as well.For one boss it will be good but not enough for two partners.
To be honest, paying off the loan yourself and releasing his debt it probably about what the business it 'worth'.Anything above that it would be what you or he wants to pay for it, and let it go to the highest bidder.
Just sit down and discuss the matter and come to a figure you are both happy with.
two methods that you could use here, provided that you have both agreed that one of you will end up buying the other one out:
1.) you give him a price for the business - he then decides whether he wants to sell his half for that price, or buy yours for the same price (so the onus is on you to offer a price that you would be happy to either pay or receive); or
2.) you give him a price for his half of the business. if he decides not to accept he must offer you a higher amount for your half. if you don't accept his offer then you must offer him more etc. etc. - eventually you will arrive at a price one of you is happy to take.
both relatively simple and realistic valuation methods provided that you both have access to all the information about the business - and they really do link in to the concept that something is only worth what someone else will pay for it.
1.) you give him a price for the business - he then decides whether he wants to sell his half for that price, or buy yours for the same price (so the onus is on you to offer a price that you would be happy to either pay or receive); or
2.) you give him a price for his half of the business. if he decides not to accept he must offer you a higher amount for your half. if you don't accept his offer then you must offer him more etc. etc. - eventually you will arrive at a price one of you is happy to take.
both relatively simple and realistic valuation methods provided that you both have access to all the information about the business - and they really do link in to the concept that something is only worth what someone else will pay for it.
The third option would be sealed bids.
Both parties deliver a single sealed bid to their solicitors.
The party with the higher bid buys the business at the other parties valuation of what they themselves would be prepared to pay for it.
That way you don't get one party bidding the other up and you get a true valuation of what the other party values the business at.
Both parties deliver a single sealed bid to their solicitors.
The party with the higher bid buys the business at the other parties valuation of what they themselves would be prepared to pay for it.
That way you don't get one party bidding the other up and you get a true valuation of what the other party values the business at.
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why thank you