How to roughly value a small business - service industry ?

Slammeddeluxe

Hi

Look for some guidance on how to value a small service business please ? Nominal assets - no land or property - I work from home. Established 22 years. Thousands of repeat clients. Thanks 

DullGreyGuy

Are you buying or selling?

If you are working from home who's actually delivering the service? Are you a one man band? You've staff delivering it? A Third Party?

Slammeddeluxe

I  am selling. I work mainly from home. Have 1 x staff an administrator.  I do see clients either here or at their home. Please advise how any of this is relevant to the valuation of the business ? 

lincroft1710

Basically you're selling a client list plus possibly some "tools of the trade", plus an employee who may be TUPEd over or who you may be making redundant. Perhaps also some goodwill Not knowing what the business actually does, how can anyone guess what it's worth? 


Anyone with any business nous would realise that whereas a client may be happy with Slammeddeluxe providing the service, would they be happy with the new owner's service. That is always the problem with a one person operation, that person is whom the client knows and the client for various reasons may decide not to continue with the new owner

Grumpy_chap

Slammeddeluxe said:

I  am selling. I work mainly from home. Have 1 x staff an administrator.  I do see clients either here or at their home. Please advise how any of this is relevant to the valuation of the business ? 

You need to separate out the value of the business that is transferable from simply being "you are the business".

It's a "service business" but what type of service do you offer?  That does make a difference as there are some sectors (say, Accountancy) where selling the client book on retirement is relatively common.  Other sectors (say Architect working in the domestic sector) where the value of the historic Client base is less transferable.

Is the staff administrator a fully "open market" employee on a proper contract and you'd plan to sell them as part of the business, or is that really referring to a close family member?

Once you have the basic, there are various factors that will influence the value of the business, including:

• ability to replace you in the business
• cost to enter - start up from scratch rather than buy your business
• liabilities that come with the business
• turnover and profitability (when presented as a genuine business paying staff salary, not Director-Owner dividends)
• etc...

For anyone to give any more advice, you would need to be far more open about what the business is.

DullGreyGuy

Slammeddeluxe said:

I  am selling. I work mainly from home. Have 1 x staff an administrator.  I do see clients either here or at their home. Please advise how any of this is relevant to the valuation of the business ? 

Because it comes down to if someone is buying from ABC LTD or @Slammeddelux. Legally it can be one but in practice it can be the other.  Let's pretend, I have tattooed the 1% of society, I decide I want to retire so will sell the business. Only I do the tattoos. The value of my business will be tiny compared to a retail company that supplies the same people... they are buying my artistic skills which aren't automatically transferable. 

Who's interested changes if they have to provide the service themselves -v- are buying a solution that includes fulfilment. 

Ultimately anything is worth what someone is willing to pay and what someone is willing to pay depends on how many bidders there are. You can find many online calculators but these assume it's not a one man band. They tend to be worth much less unless you find your doupleganger 

tightauldgit

Slammeddeluxe said:

Hi

Look for some guidance on how to value a small service business please ? Nominal assets - no land or property - I work from home. Established 22 years. Thousands of repeat clients. Thanks 

Go to some business brokers and ask them for valuations. 

It really depends on so many things that we don't know - especially with service businesses as so much of that is often dependent on the person supplying the service. It depends a lot on the nature of the service also. 

The short answer is 'probably less than you think it is' but talk to a broker or three and see what they say.