Home – New Forums Other discussions How should I go work out the value of my business to sell it?

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  • #997771
    Allsortworkwear
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    I have been running my workwear and uniform business for a few years now and it is running at a small profit, it has very low overheads because it is easily run from home. The most impressive part, in my opinion, is my website as it allows for online ordering in a business which people would normally spend a good deal of their time producing quotes which may or may not lead to a sale. I have worked out a profitable flat-rate pricing structure and it works really well. I also have a number of Queensland Government customers who generate new word of mouth business every week. I have a large email list a facebook page with over 3,000 likes and over a thousand twitter followers. I don’t know how to place a value on this given that the current profit is not that impressive but it is increasing without me actually doing anything and the potential is huge as all of the work is already done.

    #1213876
    Paul – FS Concierge
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    Hi [USER=86837]@Allsortworkwear[/USER] ,

    I would speak to several business brokers to get an appraisal.

    If profits are growing, you will always be better off waiting until you feel profits are at their zenith.

    Based on what you have said, I would be surprised if you could attract a 20% premium over a straight net profit per year multiple for your industry.

    Cheers

    #1213877
    Allsortworkwear
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    Paul – FS Concierge, post: 255932, member: 78928 wrote:
    Hi [USER=86837]@Allsortworkwear[/USER] ,
    Based on what you have said, I would be surprised if you could attract a 20% premium over a straight net profit per year multiple for your industry.

    Cheers
    I don’t even know what that means.

    #1213878
    Paul – FS Concierge
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    In my field, a cleaning business will sell for roughly 1.2 to 1.5 times annual net profit. this is called the multiplier.

    Different industries have different multipliers normally ranging from 1.0 to 6x annual profits.

    A business broker will be able to help.

    Good luck.

    #1213879
    David
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    There is business valuation software available online at http://bizpep.com/businessvaluationsoftware.html

    Others have found this approach useful.. it may be of help.

    David

    bizpep.com applications deliver unique business and investment insight providing solutions for 1000's of clients world-wide
    #1213880
    elissa.doxey
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    The facebook likes and twitter followers won’t generate much in the way of value (if any) – emphasis is on net profit and goodwill – and the value of goodwill is often hard to substantiate.
    Have a look at the site that David suggested and if you’re not sure about approaching a business broker yet, check if your accountant can help.

    #1213881
    JacquiPryor
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    Hi there,

    A little late to your post but https://www.business.gov.au/info/exit/value-your-business might help. It sets out the common methods used to value your business.

    If you’re not sure how to apply these methods, an accountant or valuation firm may be able to assist in doing so.

    You mention running at a small profit. Is this AFTER you are paid? If so, then often you might put your salary back into profits (as, a new owner wouldn’t be paying you if you are not staying on in the business). For example only, your financials suggest a 50K profit, but you paid yourself 50K for the year – this is 100K ‘profit’ to another person if they’re not paying you… with that they could (again for example) pay themselves 75K and still have 25K profit in the business. Also consider how much of the value is you? Prospective buyers might see less value if you are fundamental to the business but won’t be staying on in any capacity. If everything is automated and not reliant heavily on you, that could be more attractive as it’s easier then for the buyer to just pick up and run with it, rather than risk losing clients because you’re no longer involved or having to spend a heap of time learning/training etc.

    Check out online ‘business for sale’ websites to see if you can find similar type businesses for sale as this might help set an idea of value. Consider the assets you hold (physical and intangible such as intellectual property – trademarks etc – and good will).

    ^^ disclaiming as information/food for thought only. I have engaged valuation firms for clients before so have a basic understanding but it is not my area of expertise so would encourage advice from a broker/accountant/solicitor or other professional appropriately qualified in setting a value for your business.

    All the best :)

    #1213882
    Dave Gillen – Former FS Concierge
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    Hi [USER=86837]@Allsortworkwear[/USER] Some great info given already.

    First you need to make a decision about whether it’s worth selling right now.

    For an initial calculation I would start with a value of 12 months of profits (all income minus expenses). Include labour in the expenses (use $20 per hour for all the time you spend working in the biz). This will often eat a lot of the profit and greatly reduce the value of the biz.

    If the business is super automated then that adds a lot of value because less of your profit is eaten.

    Now you have a ballpark on value you can make a decision about what to do. If the value is quite low (and income is growing) then waiting 6 months will directly increase the value for you as [USER=78928]@Paul – FS Concierge[/USER] has suggested.

    Good luck!
    Dave

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