[regency]

hi there everone
am looking for some advice.
i have been working for a company as manager for the last 8 years.i have been runing it for 4 years.
the boss wants to sell it.they have told me that they will sell it to me for 3 times the net profit which they say is discount as they couid sell for more.
can ay one tell me how to go about valeing the business
                       thanks guys

[julie ellis]

Hi Regency....what type of business is it...how long est...are clients contracted,would need more info like this to give you an opinion

Regards

Julie

[BDCS]

Take the books to your accountant and ask their advice - I'd not take too much notice of any advice given here as we are experts in our field and not accountants. I'd also make noises about leaving which would strengthen your position during negotiations

[steve_doyle]

Take the books to your accountant and ask their advice - I'd not take too much notice of any advice given here as we are experts in our field and not accountants. I'd also make noises about leaving which would strengthen your position during negotiations

Sound advise here,

Have an accountant do it.

[julie ellis]

Accountants normally say 3 times profit..sounds like the owners have already had that advice from their accountants.

[BDCS]

Accountants can make books look good or bad depending on whats wanted, thats why you get your own - independant unbiased one to give honest advice. its not as simple - the lease might end this year and be heaps more next

[steve_doyle]

Accountants normally say 3 times profit..sounds like the owners have already had that advice from their accountants.

whatever you do, get your own accountant to do it, and dont accept anyone elses figures/valuations.

simply put,

If your not paying for the advice you dont know its being given with your best interest in mind.

[regency]

hi juile,
the business has been est for 13 years.we hve 35 clients on a regular basis but we only have 2 contracts in writing.we are a contract cleaning company with carpet cleaning,fire and flood and any other type of cleaning

[julie ellis]

Hi Regency...buying a business is no different than if you were buying a car for example..you have to weigh up the good and the bad the pros and the cons in business this is called due dilligence....

you have the advantage in this instance in that you have managed the business and therefore have an intimate knowledge of the good and bad..usually if their are no contracted clients then the goodwill premium is somewhat reduced,however because of your position i presume that you will be very familiar with all the clients therefore if you were to take over the business there would be a good chance that they would stay as a client with you.

I would go and discuss this with an accountant just for your own peace of mind ,they will crunch the numbers,but in the end you have to decide that whatever price they are asking IS IT WORTH IT TO YOU ? how badly do you want it..everybody has their own reasons for buying a business...you know this business..you have an advantage..what is your gut instinct to the price they are asking..do you think its fair?.

Hope this helps you towards making an informed and calculated decision

Good luck
Julie

[regency]

thaks juile

[bfg58simon]

Evening Regency: Do you mean 3x pre or post tax profits?

For comparison, assuming the business is established and is not owner managed (which you have stated it is!), IMO a reasonable valuation would be 5-6 times post tax profit. Payments for the business should be in milestones adjusted against actual return, perhaps half at handover and then the remainder at 9 months then 12 months.

The above can be adjusted upwards to as much as 8x post tax profits for a larger, well run business with ISO/established management team/quality client base/opportunity for growth/no debt/etc.

Conversely the business could also be worth less. The old cliche "it's only worth what someone will pay"

Go for it then develop and expand the business!

[CLEAN-MASTER]

I've bought & sold a few different businesses & business agents do value at 3X net profir pre tax but that is for businesses with a fixed trading base e.g post office or pub. A business based from home or where the office can easily be re-located & has no real value is only worth 1.5X net profit pre-tax.