Business valuation

[TyrantDesigner]

Silvertip, from someone who has sold a business to having a family member to starts and flips turn key businesses ... here is the basic truth. 9 times out of 10 you won't get a decent valuation above 2 times the invested valuation of the equipment of a shop unless you can walk away for a month and it still operate to a reasonable success without you there holding hands. If you walk away from the shop for a month and it folds, most investors won't want to put forth that much time. Sometimes you can find someone if you can take them on as a partner (buying in half) then letting them get up to speed to fully take over (buying the other half). The reason why the valuation stinks is because the owner is the face of the business in most of those cases ... and 90% of the customer interaction has been sold on the basis of the relationship between owner and customer. Change that and the customers usually drop off a significant amount which is why soft transition ownership is a way of getting a decent valuation. Most shops can't survive a hard sale if they lose 30% of the customers because they only liked the old owner and while the new owner is trying to recoup the cost of buying a business within the first 2 years. If that is the case, in an industry that most shops can be started with around $5k and some good design work ... most people will start their own shop and do it their way, with new equipment and a clean reputation (both good and bad) to build off of.

I wish you luck.

 

[inkfrog]

Rented spot @ flea market + 3k plotter is not worth 250k. But it might be my opinion. Business does not have its own building... operates with 1 cutter @ rented flea market spot....? And its valued at 250k? It can do million dollars in sales but its not worth it in my eyes. Any one can rent right beside you, pay 3k or less for a cutter and do same work without spending 250k.

Yes it is, maybe not to you, but someone agreed to pay the price on that particular day. How much its worth today is a different matter, it may be worth more, it could be worth less. And without knowing the specifics of the sale (might have sole rights for example) its impossible to say.

If that business is generating 25% nett on a million in sales, find me something else which is legal which generates that return. They haven't bought a job they have bought a cash cow.

Whatever its specific circumstances were, there was no substantial value in the equipment so it must have been showing excellent trading numbers.

 

[reQ]

Yes it is, maybe not to you, but someone agreed to pay the price on that particular day. How much its worth today is a different matter, it may be worth more, it could be worth less. And without knowing the specifics of the sale (might have sole rights for example) its impossible to say.

If that business is generating 25% nett on a million in sales, find me something else which is legal which generates that return. They haven't bought a job they have bought a cash cow.

Whatever its specific circumstances were, there was no substantial value in the equipment so it must have been showing excellent trading numbers.

Talk to any investor, and i mean REAL investor with brain - they would laugh at that evaluation.

 

[inkfrog]

Talk to any investor, and i mean REAL investor with brain - they would laugh at that evaluation.

If you cant understand the point I am making then have a nice day, and good luck for the future.

 

[reQ]

If you cant understand the point I am making then have a nice day, and good luck for the future.

I completely understand your point. But if you think thats how you evaluate business then good for you
Have a nice day

 

[Gino]

Both of you are right.......

Inkfrog is relating to the saying by PT Barnum, while reQ is relating to using real common sense.

 

[Davidford7]

Rented spot @ flea market + 3k plotter is not worth 250k. But it might be my opinion. Business does not have its own building... operates with 1 cutter @ rented flea market spot....? And its valued at 250k? It can do million dollars in sales but its not worth it in my eyes. Any one can rent right beside you, pay 3k or less for a cutter and do same work without spending 250k.

I guess the answer is pretty easy if you ask yourself ..Why didn't you do it then if anyone can?
Answer: You did not have the designs that were selling.
You were not able to get a spot next to me, and many tried.
You did not have the relationship with the flea market that limited the competition.
You did not have the idea first.
So many say I could have done that but it's the one that did do it that counts.

To fill in some of the blanks the shop netted over $5,000 a weekend. Do the math on that, Net $310,000.00 a year for 2 days a week.

 

[mark galoob]

id say 25% net on a million bucks is worth messing with. but i guess im not a real investor...

 

[reQ]

I guess the answer is pretty easy if you ask yourself ..Why didn't you do it then if anyone can?
Answer: You did not have the designs that were selling.
You were not able to get a spot next to me, and many tried.
You did not have the relationship with the flea market that limited the competition.
You did not have the idea first.

1) If you had a "special" relationship with flea market... once u sold it for 250k (if your not bsin me) then what happens?
2) What idea? Buy the cutter and mass produce decals? Follow new topics that pop up here, you will be surprised
3) Special design? That i will no even comment

Overall i am 99% you tell us lies here or person who bought 3k cutter & spot on flea market for 250k is a complete retard.

 

[inkfrog]

Both of you are right.......

Inkfrog is relating to the saying by PT Barnum, while reQ is relating to using real common sense.

"There's a sucker born every minute" ? No I wasn't implying that at all, I was making the point that the valuation was based on its trading numbers and profitability, not the value of the equipment, which in terms of the thread overall is an important consideration for the lady who is considering selling a business in which she has a substantial investment.

The thread is filled with posts which imply someone would be doing her a favour if they paid half the book value of her equipment, I don't agree with that point of view.

This industry is evolving and new markets are opening for people with the equipment and skill sets which we possess. Why should she have a fire sale on a business with excellent growth potential and one that has a proven track record?

 

[Gino]

"There's a sucker born every minute" ? No I wasn't implying that at all, I was making the point that the valuation was based on its trading numbers and profitability, not the value of the equipment, which in terms of the thread overall is an important consideration for the lady who is considering selling a business in which she has a substantial investment.

The thread is filled with posts which imply someone would be doing her a favour if they paid half the book value of her equipment, I don't agree with that point of view.

This industry is evolving and new markets are opening for people with the equipment and skill sets which we possess. Why should she have a fire sale on a business with excellent growth potential and one that has a proven track record?

I was not referring to her dilemma as being a sucker to buy her business, but your endeavor at the flea market.


Not to be a , but in your scenario you claim to have been making all that money at a flea market on weekends. Most of it was cash and I'm sure you wrote it all down and claimed it, huh ?? Also, I've never seen a sign shop at a flea market, drag strip or any other open area street vendor affair that wasn't selling illegal stuff, besides the ripoff numbers and logos all day long. You found a sucker, someone who just saw dollar marks in their eyes and paid no attention to the real business aspect of the overall deal. You had licenses to sell and all the other legal documentation that went along with your business, huh ??

I sincerely hope she doesn't hafta take a bath on the business and equipment, I really do for her and her family's sake, but someone like you come along..... you ain't gonna give her jack based upon your two priors. And that's just about what almost anyone else will do, too. There are too many weasels in the business world today and you just said it yourself, you just used different words.

 

[inkfrog]

I was not referring to her dilemma as being a sucker to buy her business, but your endeavor at the flea market.


Not to be a , but in your scenario you claim to have been making all that money at a flea market on weekends. Most of it was cash and I'm sure you wrote it all down and claimed it, huh ?? Also, I've never seen a sign shop at a flea market, drag strip or any other open area street vendor affair that wasn't selling illegal stuff, besides the ripoff numbers and logos all day long. You found a sucker, someone who just saw dollar marks in their eyes and paid no attention to the real business aspect of the overall deal. You had licenses to sell and all the other legal documentation that went along with your business, huh ??

I sincerely hope she doesn't hafta take a bath on the business and equipment, I really do for her and her family's sake, but someone like you come along..... you ain't gonna give her jack based upon your two priors. And that's just about what almost anyone else will do, too. There are too many weasels in the business world today and you just said it yourself, you just used different words.

I think you may have me mixed up with another poster, I didnt sell anything I just made a comment on a business for sale dilemma post

 

[TyrantDesigner]

I was not referring to her dilemma as being a sucker to buy her business, but your endeavor at the flea market.


Not to be a , but in your scenario you claim to have been making all that money at a flea market on weekends. Most of it was cash and I'm sure you wrote it all down and claimed it, huh ?? Also, I've never seen a sign shop at a flea market, drag strip or any other open area street vendor affair that wasn't selling illegal stuff, besides the ripoff numbers and logos all day long. You found a sucker, someone who just saw dollar marks in their eyes and paid no attention to the real business aspect of the overall deal. You had licenses to sell and all the other legal documentation that went along with your business, huh ??

I sincerely hope she doesn't hafta take a bath on the business and equipment, I really do for her and her family's sake, but someone like you come along..... you ain't gonna give her jack based upon your two priors. And that's just about what almost anyone else will do, too. There are too many weasels in the business world today and you just said it yourself, you just used different words.

Wrong guy you're calling out.

 

[reQ]

I was not referring to her dilemma as being a sucker to buy her business, but your endeavor at the flea market.


Not to be a , but in your scenario you claim to have been making all that money at a flea market on weekends. Most of it was cash and I'm sure you wrote it all down and claimed it, huh ?? Also, I've never seen a sign shop at a flea market, drag strip or any other open area street vendor affair that wasn't selling illegal stuff, besides the ripoff numbers and logos all day long. You found a sucker, someone who just saw dollar marks in their eyes and paid no attention to the real business aspect of the overall deal. You had licenses to sell and all the other legal documentation that went along with your business, huh ??

I sincerely hope she doesn't hafta take a bath on the business and equipment, I really do for her and her family's sake, but someone like you come along..... you ain't gonna give her jack based upon your two priors. And that's just about what almost anyone else will do, too. There are too many weasels in the business world today and you just said it yourself, you just used different words.

Its very simple! He said himself:

1) Business did not have any customer base
2) They had 3k plotter & vinyls
3) They had the one and only designs in industry
4) Owner had "hand shake" agreement with flea market to be the only one guy with plotter there?

After that i was laughing my arse off with evaluation of 250k, specially with "hand shake" agreement.

P.S. Did buyer ask at least for signed letter from flea market that they will not allow another guy with plotter & special designs?

Sold a flea market business that was operating almost 2 years with 3k plotter for 250k. Cool story

 

[Gino]

Sorry, I thought it was the same poster. I was directing my comments towards DavidFrost.

My bad. So Sorry............. :Oops:​

 

[Ponto]

Sorry, I thought it was the same poster. I was directing my comments towards DavidFrost.

My bad. So Sorry............. :Oops:​

.... though misdirected,.... the sentiment was valid!!!

JP

 

[signguypgh]

Take this for what it's worth, ignore it if you will, none of this is personal just my observation:

You don't own a business, you own a job. Your husband's talent is what you are selling....if he's out of the picture there is no product left to sell. There's no production system in place that you can just plug anyone into, there are no employees who are doing the actual work that a new owner can rely on, there's nothing but a building and some used equipment. Client lists? Practically worthless. Art files? Nada.

Unfortunately this is your situation. People are liking these comments for a reason.

Having successfully sold a business in the past, this is what learned really matters:

1. Assets (i.e. "stuff") - equipment, real estate, data, websites, and yes art and client files. Make a list of every scrapping thing and put number on it. If it is more intangible, guess what it would cost to recreate. You're going to negotiate with somebody about this eventually anyway. If you don't already have it, chances are good you've been on the wrong path.

2. Reputation, i.e. "brand valuation" (how many people really value your name). Number of customers each year tells the story well.

3. PROCESSES! Employee training program? How about order management, fulfillment, software, competitive product development processes? Think of it this way. Is an owner buying a garage full of tools or is your business a streamlined operation where all internal activity, policy and order is well documented and organized?

Businesses are collections of these things. Any good investor is thinking "can this thing run itself?"

Too many small businesses are simply jobs for their owners. Businesses fetching good money pay an owner salary and then some. There needs to be something of significance left for the person/group that mobilized the capital and risk to get the venture moving. If I own a business with zero percent return, what is my motivation to committing capital to owning it if it doesn't provide me a job?

The cost for entry in the sign industry is low. You need compelling reasons for why your business should not be started from scratch with the same amount of money you are asking for it.

That said, depending on your situation you should judge what it might take to make it sellable. Might be out of your league, might not be.

 

[Andy D]

unless you can walk away for a month and it still operate to a reasonable success without you there holding hands. If you walk away from the shop for a month and it folds, most investors won't want to put forth that much time.

I agree with this 100%. Not to sound like a broken record... but in the E-Myth book he says that, from day-one of opening a business, you should make it one of your main goals to
separate yourself from the day to day running of it, if it doesn't run correctly when you're not there, then you always have to be there and it's a job you paid for...
but if it can run without you having to be there, then you can be the entrepreneur that every successful business must have in order to grow... plus it makes it much easier to sell and
move on to your next adventure.

 

[Davidford7]

Gino "Most of it was cash and I'm sure you wrote it all down and claimed it, huh ?? Also, I've never seen a sign shop at a flea market, drag strip or any other open area street vendor affair that wasn't selling illegal stuff, besides the ripoff numbers and logos all day long. You found a sucker, someone who just saw dollar marks in their eyes and paid no attention to the real business aspect of the overall deal. You had licenses to sell and all the other legal documentation that went along with your business, huh ??"

I hope your comment wasn't to imply that I violated any trademark tax issue. Although it seemed to read that way. Weather we claimed any, all or none of should not concern you at all. Having never seen a shop at a flea market that doesn't rip logo and art off shows you have limited experience. As far as the "sucker'" that bought the business they are still making over $300,000 net a year which may are may not be equal your net income.

The point directed to the OP was the business is worth what someone is willing to pay. John Maynard Keynes described this theory years ago.

I hope I didn't offend you. Don't be so jealous huh.

 

[reQ]

As far as the "sucker'" that bought the business they are still making over $300,000 net a year which may are may not be equal your net income.

:ROFLMAO: