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  • PRO

    3-5 multiple of NET annual profit is the simplest method but doesn't take into account that some businesses may be asset heavy which could bump it a little so perhaps 3 X net plus assets at current value if that is the case.

  • do you have written contracts with your custermers if so for how long and do you employ workers on the books also is there any machinery included in the sale, brand and how old is it 

    how far appart is the work it makes a lot of differance to the price, that is if you manage to sell it, if you finish the folk will just find somone else 

  • PRO

    Probably not as much as you'd like it to be in reality. Ultimately its worth what someone can or will pay for it, and you only have a strong negotiation position if there are multiple interested parties.

    The trouble is it's your baby, you've nurtured it, grown it, put in the tough hours etc, So it should be worth something good, shouldn't it?

    There are several multipliers that are readily available, but they all come with assumptions and points of view that prospective buyers may or may not have.

    Like Graeme mentions, 3 x net profit; Assuming you're not limited, as a sole trader, this is effectively your available salary.

    Another is 6 x final profit; this is the money left after you've taken a reasonable salary and is effectivley that left over that can be re-invested into the business. Taking min salary for tax purposes and to maximise this valuation method does not count as a reaonable salary in this instance.

    Stock / out of the ordinary equipment would be a separate negotiation.

    However, the above don't take into account whether "you are the business"; ie at the moment, I'm assuming you are the lynchpin, customers all know you, trust you, happy to use you...what happens when you leave. They might not like the new owner and just find someone else! So in this instance, a lot of the value of the company is you, and this is lost when you're gone. So the above figures end up being discounted substantially to account for that. The exception is when you have people on contracts for several seasons that are hard to get out of...not a usual situation in a domestic market. Or you are sufficiently remote from the day to day running of the business, but given your size, that's unlikely.

    Another question to face is why should someone buy your business? Why not build up their own customer base. In reality how much would it cost them to quickly build a business if they chucked money into some sensible marketing? £100 per customer? Could be less. Say they did that over 12months and had cash reserves to live off whilst growing. At this point, in their mind, to procedd with you they are just buying a marketing / customer list with assumptions how many customers  will leave because it's not you?

    So no simple answers I'm afraid. Have a look in Daltons weekly online to see what people are asking. Note this is asking price, so the starting point for negotiations.

    Perhaps go into the BOG and give us more information in a private environment.

  • PRO

    Out of the 130K what profit is there for the directors? Thats maybe what’s its really worth? We have looked at a couple but they had little or no value in that regard...

  • I would suspect very little value to another, if you are taken away from the business what is left, second hand machinery is often worth a lot less than book value, employees can move, a client list, if you stop these clients will be looking for a new supplier, even quite large organisations can be worth very little to another, a fleet can be on lease same with big machinery, client base could come from public tenders, yards offices rented, often the real value of these business is in the people and systems in place to carry out the work. Have looked at small businesses where once you add in all the un paid hours the owner, and family put in, and add in costs to cover use of home office, garage small yard etc What was on paper a profitable little business becomes a loss or at best break even.

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