making an offer on a business partnership

vtmil

Hi everyone, im hoping you can help. My boss wants to sell half his business and while im intersted Im not sure how to go about it. I will need a loan for the majority if the amount, so i'll need a business plan. I currently have copy of the accounts - is there anything else i need to look at?

it is a food retail outlet.

Also, he is open to offers, but i dont really know where to start. some facts i have include

turnover - 260 000 pounds
net profit - 10 000 pounds
5 000 current stock
no debts
no property - currently rent, 4 years lease left.
Some fixtures and fittings

I probably need to have it valued proffesionally but I just wondered if any of you have ideas on a ball part figure?

Thanks in advance!
:rolleyes: vtmil

Lifeisbutadream

Is that right - net profit £10,000, or should it be £100,000?

vtmil

its 10 000 on the accounts - 175 000 on purchases and 75 000 expenses - both of which could be reduced

Lifeisbutadream

Unfortunately I cant help - I am interested because I am in a partnership with OH and someone wants to buy a share of the business.

Our turnover is of a similar amount, but we are a building/joinery business.

Debt_Free_Chick

vtmil wrote: »

Hi everyone, im hoping you can help. My boss wants to sell half his business and while im intersted Im not sure how to go about it.

What does he want for it?

Bean_Counter

vtmil wrote: »

I probably need to have it valued proffesionally but I just wondered if any of you have ideas on a ball part figure?

I would have thought that you would have to get an accountant involved to look beyond the figures. How much of the expenses is money that he has taken out in salary etc? You would also want to look at the cash position i.e. ignore non-cash item such as depreciation.

You would also want to perform some sort of due diligence. Is there likely to be any competition opening up nearby that would affect trade? Are there any potential problems that have not yet come to light, such as supplier disputes that might affect supply of stock or disputes with former employees that might cost money in the future. Are there licences that come up for renewal that might be a problems to renew? Factor in any tax bills that might be to paid in the future. Look at trends in the business. Has turnover / profit / cash been going up or down over the last few years?

Also bear in mind that you are presumably half of future profits, on the face of it £5,000 per annum. Personally I would not part with much capital up front for that sort of uncertain return and with only four years left on the lease.

vtmil

thanks for your advice bean counter - looks like i'll get the proffesionals involved. there are some external threats too - tesco is trying to open up in the area! - its putting me off somewhat. he's asked for 30k, i'm thinking of an offer no where near that though.

thanks

motorguy

vtmil wrote: »

tesco is trying to open up in the area! - its putting me off somewhat.
thanks

it would put me off a lot.

Tooticky

Company valuations are very tricky, there are so many ways to value a company, for you to at least get a rough guide you'd need to look at the growth over at least the past 3 years usually you could use this information to form a rough forecast and therefore loosely predict the kind of return you could expect.

You need to factor in exceptionals and changes in the market (this includes competition especially competition from giants)

Talking to an expert is all well and good but you get what you pay for and an investment of this size might not be worth the outlay or if the outlay is small the information might not be very accurate.

Maybe also consider the implication if it all went wrong, not only would you be in debt but you’d also be unemployed.

To be honest though, It’s unlikely that anyone will give someone 30k to own half a business and have to wait 7 years minimum until they can get a return so if he’s desperate his price will come down.

Besides if you think that you can improve the performance maybe offer him 10K and say he can have the other 20k from the increased profits you make this year by having you on board

vtmil

thankyou for your help, some serious thinking to do now, your advice has helped me a lot cheers