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Old 01-04-2017, 07:12 PM
 
19 posts, read 24,097 times
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Excluding a salary which may or may not be fair.
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Old 01-04-2017, 07:28 PM
 
Location: The Triad (NC)
31,388 posts, read 69,894,293 times
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The business has two basic assets:
1) the material things that can be bought and sold and a fair value applied rather easily.
2) the intangibles; often called "good will" which has ZERO value no matter what anyone says.
(like with real estate... they are selling a "home" ... you need to focus on buying a "house")

As to recouping the outlay for the various material things you need to break these down
by longevity eg a building vs a fax machine or a closet full of office supplies.

The material value ÷ the NET NET annual pre tax earnings (after owner salary etc) = the number of years
If the material value is mostly durable things (building, equipment, etc) the years can be longer.
Usually there is no building or equipment of much durability though ...which gets you down to the 3 to 5 range
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Old 01-04-2017, 07:36 PM
 
Location: Wartrace,TN
6,482 posts, read 10,209,891 times
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Quote:
Originally Posted by andrewkw View Post
Excluding a salary which may or may not be fair.
I wouldn't be interested in a business unless it earned 10% ROI or more per year hands off (I.E. I am not working there).
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Old 01-05-2017, 10:20 AM
 
Location: Forests of Maine
32,512 posts, read 52,935,349 times
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Quote:
Originally Posted by andrewkw View Post
Excluding a salary which may or may not be fair.
There are too many variables in this to be able to give you a solid answer.

Every type of business is different.
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Old 01-05-2017, 12:54 PM
 
8,205 posts, read 3,671,088 times
Reputation: 7465
Quote:
Originally Posted by MrRational View Post
The business has two basic assets:
1) the material things that can be bought and sold and a fair value applied rather easily.
2) the intangibles; often called "good will" which has ZERO value no matter what anyone says.
(like with real estate... they are selling a "home" ... you need to focus on buying a "house")

<<SNIP>>
If one were looking to buy a burger restaurant, and the two options available are 1) Big Bob's Burger Barn, and 2) McDonald's, and each of them has the same dollar value of PP&E, are you suggesting that the purchase price should be the same for each, because the goodwill associated with McDonald's has zero value?
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Old 01-05-2017, 02:15 PM
 
28,900 posts, read 49,215,359 times
Reputation: 46329
Quote:
Originally Posted by MrRational View Post
The business has two basic assets:
1) the material things that can be bought and sold and a fair value applied rather easily.
2) the intangibles; often called "good will" which has ZERO value no matter what anyone says.
(like with real estate... they are selling a "home" ... you need to focus on buying a "house")

As to recouping the outlay for the various material things you need to break these down
by longevity eg a building vs a fax machine or a closet full of office supplies.

The material value ÷ the NET NET annual pre tax earnings (after owner salary etc) = the number of years
If the material value is mostly durable things (building, equipment, etc) the years can be longer.
Usually there is no building or equipment of much durability though ...which gets you down to the 3 to 5 range
You are absolutely out of your mind if you believe that.

If a business has a loyal customer base consisting of those who have patronized it steadily, that has real and substantial value.
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Old 01-05-2017, 02:44 PM
 
19 posts, read 24,097 times
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Sorry for being vague, I am trying to protect my privacy not from you guys replying but from people in my area.

This business is pretty much entirely based on "good will" and intangibles with very little in real assets. That being said it grosses about 70k a year, has been operating a long time with a similar cashflow and should profit somewhere in the range of 40-45k a year after expenses (excluding a salary). Actual startup other than purchase price is less then 10k. It is very stable, but with limited potential for growth. I know these numbers seem small and most people who can give an answer to me would never consider something with such a low profit number but for this location those numbers work.
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Old 01-05-2017, 05:41 PM
 
Location: Haiku
7,134 posts, read 3,759,589 times
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If you are saying that revenues are 70k and EBITA (income before taxes, basically profit) is 40K, then your margin is about 60% which is huge!

I would worry a bit about what you will do with it in the future. If the growth prospects are not great, will you be able to resell it easily? It sounds like a niche business.
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Old 01-06-2017, 08:40 AM
 
Location: The Triad (NC)
31,388 posts, read 69,894,293 times
Reputation: 37499
Quote:
Originally Posted by TwoByFour View Post
If you are saying that revenues are 70k and EBITA...
I think he's saying that the owner takes a $40,000 "salary"...out of that $70,000 gross.

Making this "business" purchase opportunity is little more than buying a job.
And likely a job that is built around the guy currently doing it.
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Old 01-06-2017, 10:29 AM
 
19 posts, read 24,097 times
Reputation: 41
Quote:
Originally Posted by MrRational View Post
I think he's saying that the owner takes a $40,000 "salary"...out of that $70,000 gross.

Making this "business" purchase opportunity is little more than buying a job.
And likely a job that is built around the guy currently doing it.
This is exactly right. It's basically buying a job except you are your own boss and the hours are somewhere between full time and part time. How do you put a realistic value on this?

It is very much a niche but again the success is there long term, but growth is limited. Costs are pretty fixed of course they will continue to slowly rise like everything else. Something like this is extra hard to put a price on. I think it will be hard to resell but options are limited which is part of what makes this appealing. Other than initial costs its pretty safe, maybe not forever but for the foreseeable future at least 5-10 years perhaps much more it is with little innovation just continuing on existing model.
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