Business Valuations tool

Robson1978

Hi - I am considering purchasing a small business and wondering if anyone can recommend a website that can help me get a sensible idea for how much the business that I am looking at might be worth. Clearly there are many factors to take into consideration that you can't always get a definitive value on and I will almost certainly end up getting professional advice, but I would like to try to get an early picture of what sort of value I might be looking at to buy the business (the current owner is keeping what he values the business at quite close to his chest for the time being).

Any advice appreciated :-)

Regards
Robson

zygurat789

Robson1978 wrote: »

Hi - I am considering purchasing a small business and wondering if anyone can recommend a website that can help me get a sensible idea for how much the business that I am looking at might be worth. Clearly there are many factors to take into consideration that you can't always get a definitive value on and I will almost certainly end up getting professional advice, but I would like to try to get an early picture of what sort of value I might be looking at to buy the business (the current owner is keeping what he values the business at quite close to his chest for the time being).

Any advice appreciated :-)

Regards
Robson

You need to know specifically what you are buying. Stock, fixed assets, goodwill etc. each will have their own value.
Stock is usually at agreed valuation, both take stock and check values to invoices.
Fixed assets can be seen and can be checked via the internet.
Goodwill, ah goodwill, this is the sale of the business ie the turnover and profit. You will need to see three years certified accounts, failing that three years tax returns, to know exacltly what the profit is. Accept no b***s**t about fiddling tax.
When you are happy with the net profit, that is your income.
Would you pay the asking price to acquire that much income??

Acc72

Robson1978 wrote: »

(the current owner is keeping what he values the business at quite close to his chest for the time being).

The simple answer is that there is no simple answer.

There are a whole bunch of different theories when valuing large companies, but when it comes to a small business it comes down to what somebody is willing to pay (and what the seller is willing to accept).

Beware of anybody who claims to come up with a valuation theory - as said previously, you need to know what you are buying (eg. stock, any debtors etc) plus also any liabilities (creditors, lease agreements etc.) not to mention are there any employees involved ? (if so, can you just buy the assets and not the actual "business " ?).

Finally, the above quote does not bode well - why is the seller being evasive ?

Surely they must have a price in mind ?

If you went to look at a house to buy you would expect the seller to specify a price ? - this is not a great start to a business transaction that relies on trust and full disclosure between all parties.

Robson1978

Thanks both - good starting point.
Acc72 - maybe's I was doing the current owner a diservice - they have unofficially said a figure of c£1.8m (the business has a stable PAT of c£200k and I think I can grow this quite a bit with my involvement) - clearly lots more due dligence to do first...

Regards
Robson

zygurat789

Robson1978 wrote: »

Hi - I am considering purchasing a small business and wondering if anyone can recommend a website that can help me get a sensible idea for how much the business that I am looking at might be worth. Clearly there are many factors to take into consideration that you can't always get a definitive value on and I will almost certainly end up getting professional advice, but I would like to try to get an early picture of what sort of value I might be looking at to buy the business (the current owner is keeping what he values the business at quite close to his chest for the time being).

Any advice appreciated :-)

Regards
Robson

This small business is being sold for £1.800,000.
Go straight to an accountant, do not pass go, do not collect £200

Acc72

Robson1978 wrote: »

Thanks both - good starting point.
Acc72 - maybe's I was doing the current owner a diservice - they have unofficially said a figure of c£1.8m (the business has a stable PAT of c£200k and I think I can grow this quite a bit with my involvement) - clearly lots more due dligence to do first...

Regards
Robson

When you said small business I thought that you meant in the low 5 figures ! - something that would cost a persons savings or redundancy payment.

For that kind of purchase price you need to be taking specific advice from somebody experienced in the specific industry.

Robson1978

Hi - don't worry, I'll defintely be taking professional advice :-)
There is also an option to buy into the business which would be a preferred route for me to take depending on the price and percentage.

Regards
Robson

zygurat789

Robson1978 wrote: »

Hi - don't worry, I'll defintely be taking professional advice :-)
There is also an option to buy into the business which would be a preferred route for me to take depending on the price and percentage.

Regards
Robson

That's more difficult but once again you haven't said precisely what you are buying.

Pennywise

Also don't forget that different industries have different valuation methods. Some are based more on turnover, some are based more on profit, some a mixture of both.

If it's a limited company, then are you buying the shares, i.e. the whole limited company, warts & all, or are you buying the business and leaving the old owner with the company shell? Massive variation in valuations one way or the other.

As a ballpark for an average small/medium business, I'd say a valuation of seven times profits is very high. More commonly used valuations would be around the 3 times pre tax profit figure, but like I say, different industries have different valuation models.

bris

Buying a business @ 1.8 million and asking advice on here, Really?

PAT? is that per annum turnover? if it's only 200k then I hope it's fixed assets are worth most of that because 200k is indeed a small business.

IronWolf

That valuation doesn't seem wildly outlandish, but I would want to see the last few years of audited financial statements. Is that £200k stable or is it fluctuating? Is it after a salary for you (the manager/owner) or are you expected to work for free.