Valuation of a business

BartyBoy

Hello all

I hope you are all well! I am not sure if this is the right section to post my question, but it's to do with employment, so here I am.

I am one of the 5 directors and a shareholder at my company. It has come to the point that I wanted to leave the company and work somewhere else. I have a 'x' percentage of share in the business, I just wanted to know how I can find out the value of my business, so that I can cash my share and leave the business completetly.

The company has been trading for over 6 years, and the profit is growing every year. I wanted to leave due to a personal reason.

Many thanks in advance!

getmore4less

As it is not traded start with the list of people you can sell to(you should know this already)

Its worth what they are prepared to pay.

SamsReturn

I think you'd find it hard to get a buyer. Unless the other Directors are prepared to buy you out.
Someone looking for their own Company to work for isn't going to come in with a group of strangers.
When you started the business didn't any of you think about what was going to happen if one wanted to pull-out ?

BartyBoy

SamsReturn wrote: »

When you started the business didn't any of you think about what was going to happen if one wanted to pull-out ?

Thanks for your comment.

We did briefly discuss about if a shareholder leaves or dies, what would happen next. From what I can remember the discussion ended up with saying the company would buy the share back, which is fine with me, but how can I work out how much my share is worth now so I can sell it back to the company?

I may have asked the wrong question here, so please pardon me.

I think perhaps I should have asked, how to find out how much my share is worth in the business?

theoretica

How much stock/tools/net assets does the business have, taking depreciation into account? You share of this would be the minimum figure to expect.

If you leave, to put the business into the same situation it would have the added expense of hiring someone as competent as you to put them into the same situation - so take all the costs of a fair wage for you (+tax, NI, insurance etc) out of your share of the profit. What does that leave as the return on being a business owner?

SamsReturn

There are so many ways to value a company, perhaps you should come out in the open with the other Directors and see how they feel.
Looking at what it's worth i'd start saying , well stock is 'x'; buildings are 'x'. Goodwill, well that's difficult at the best of times. I'd want to see your books and there'll be a miriad of ratio earning figures. I'd ask myself.... How much would it cost me to set up a similar business; and how are similar businesses doing; what does the company do ? Do you depend of much of your income on just what product ? What if someone started to sell a better one at a lower price. What is your customer base like ? If you sell 75% to just one person, and they went bust overnight.... where does that leave you ?

BartyBoy

theoretica wrote: »

...it would have the added expense of hiring someone as competent as you...

This is very touching comment to me, I must say.

The reason of leaving is because my salary is capped by other directors while they are earning £5-£9k more than me a year. We all do more or less the same jobs every day and have the same amount of share. In my opinion, I did a hell of a lot for the business, I see myself as a dog body. I dare to say the company will not be able to find another person as competent as me at the salary that I am receiving. The other directors don't see that, they only care themselves and they are interested in their own benefits. For the sake of closing the huge salary gap, they decided to cap my salary and threatened me that I will not be able to find another company which can give me the same amount of money. It is pure bullying and insulting.

getmore4less

What do the annual returns value the shareholder equity at?

That will be a start.

agrinnall

How much of your own cash did you invest in the company, either at set up or later? From what you say about the other directors I doubt whether you'll get back any more than you've put in, and maybe not even that.

getmore4less

If the company is to do a share buyback does it have the reserves to buy them?

getmore4less

Are you not getting most of your income through dividends to save NI?