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Old 12-06-2013, 02:41 PM
 
3 posts, read 2,361 times
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Hello everybody! I'm new to the forum and looking forward to chatting with you guys. Does anybody have experience or preference with a valuation tool that can help me understand what a business is worth? Thanks.
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Old 12-08-2013, 09:38 AM
 
Location: The Triad (NC)
26,914 posts, read 58,068,998 times
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Quote:
Originally Posted by mlwhite79 View Post
Does anybody have experience or preference with a valuation tool
that can help me understand what a business is worth?
Way too many variables for any one size fits all approach.
Heck, valuing the tangible assets is hard enough.
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Old 12-08-2013, 11:20 AM
 
Location: East of Seattle since 1992, originally from SF Bay Area
28,479 posts, read 50,784,831 times
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In general the value of the "goodwill" is often based on 2.5 times the annual revenue from the regular, established customers. Then you have to add the value of property, inventory and equipment owned, and deduct for things like a lease that is not assignable, current market conditions, competitors in the market area, location, years in business and more.

There is no tool that can accurately define the value. What it comes down to is what someone is willing to pay for it. When I bought a business in 1993 the seller was asking $70,000, I offered $30k and after that was accepted asked for a discount for cash and got it down to $25k. I found out later it had been for sale for months and the owners were divorcing and moving so they would have walked away if I hadn't happened along.
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Old 12-08-2013, 04:29 PM
 
Location: Los Angeles (Native)
24,284 posts, read 13,761,048 times
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Quote:
Originally Posted by Hemlock140 View Post
In general the value of the "goodwill" is often based on 2.5 times the annual revenue from the regular, established customers. Then you have to add the value of property, inventory and equipment owned, and deduct for things like a lease that is not assignable, current market conditions, competitors in the market area, location, years in business and more.

There is no tool that can accurately define the value. What it comes down to is what someone is willing to pay for it. When I bought a business in 1993 the seller was asking $70,000, I offered $30k and after that was accepted asked for a discount for cash and got it down to $25k. I found out later it had been for sale for months and the owners were divorcing and moving so they would have walked away if I hadn't happened along.

That's interesting. So I'm assuming they were willing to hold financing prior to the $25k offer?

Do you still own the business? What was the net return of the business when you bought it?
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Old 12-08-2013, 06:28 PM
 
Location: East of Seattle since 1992, originally from SF Bay Area
28,479 posts, read 50,784,831 times
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Yes, they expected to carry up to 90%. The last year tax records for the previous owner showed gross sales $70,000, taxable income $37,000. They were absentee owners with only one employee and no recent marketing other than the yellow pages. Regulars had been ready to change vendors because of the poor service and were happy to see an owner on site. I was able to double it the first year and had good growth through the 90s. With the loss of customers due to the economy I folded and did freelance work for others until I got a good job, but still do some of the work on the side now. I saw about 12 competitors in the region go away between 2006 and 2010.
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Old 12-09-2013, 08:41 AM
 
Location: Sunnyside
2,009 posts, read 3,778,624 times
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Quote:
Originally Posted by mlwhite79 View Post
Hello everybody! I'm new to the forum and looking forward to chatting with you guys. Does anybody have experience or preference with a valuation tool that can help me understand what a business is worth? Thanks.
you can use comparables. What type of business are you trying to value?
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Old 12-09-2013, 01:15 PM
 
41 posts, read 73,142 times
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There are many online calculators to find out the value of an online business. These calculators are used as approximation tool to find business worth, though accurately valuing of a small business is often the most challenging part of the process.
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Old 12-09-2013, 01:26 PM
 
Location: Indianapolis
505 posts, read 758,804 times
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The best tool is a valuation professional. If the valuation is really that important to you, the cost is worth it as well.
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Old 12-09-2013, 04:48 PM
 
Location: Los Angeles (Native)
24,284 posts, read 13,761,048 times
Reputation: 11450
Quote:
Originally Posted by Hemlock140 View Post
Yes, they expected to carry up to 90%. The last year tax records for the previous owner showed gross sales $70,000, taxable income $37,000. They were absentee owners with only one employee and no recent marketing other than the yellow pages. Regulars had been ready to change vendors because of the poor service and were happy to see an owner on site. I was able to double it the first year and had good growth through the 90s. With the loss of customers due to the economy I folded and did freelance work for others until I got a good job, but still do some of the work on the side now. I saw about 12 competitors in the region go away between 2006 and 2010.
Interesting, thanks for sharing!
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Old 12-10-2013, 04:13 PM
 
3 posts, read 2,361 times
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For somebody who doesn't want to spend $5k for a valuation professional, do you have a good recommendation for a website or online tool that could help? It doesn't have to necessarily be free
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