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O/T: Valuing a Small Business
- Thread starter KZNSeagull
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KZNSeagull
Well-known member
- Thread starter
- #22
How historic? Average of last 3 years?
Sounds like I should! Thanks
KZNSeagull
Well-known member
- Thread starter
- #23
Bed or the misses?
nwgull
Well-known member
Chances are that this 4x estimate that I've heard is a load of bollocks and only really applies to certain types/size of business.
In my case it was last year's audited accounts. Average of last 3 years is about right if profitability is volatile.
KZNSeagull
Well-known member
- Thread starter
- #26
Last 2 years are similar, 2013 profit was way down as I was stocking up the shop after a difficult trading period in 2012. That is pretty obvious in the accounts though. Thanks!
For a trading business, the value is that of the net assets being sold, plus goodwill. Goodwill is calculated at 3 x weighted average post-tax profits for the last three years. Deduct a reasonable notional salary to the owner/director, from the profits, before deducting the tax. Also, reverse the effect of any exceptional costs / gains within those three years.
For a professional business - one year's fees.
For an asset based business eg property investment - the actual open market value of the underlying assets.
The above are guides, but in reality the price is what a buyer is prepared to pay.
For a professional business - one year's fees.
For an asset based business eg property investment - the actual open market value of the underlying assets.
The above are guides, but in reality the price is what a buyer is prepared to pay.
KZNSeagull
Well-known member
- Thread starter
- #28
Thanks all for your comments. I have sought advice from 4 different sources and as suspected, they have come up with rather different methods. They are:
1. A rough rule of thumb for a book shop is 18 times your average monthly Net Profit.This profit includes all benefits to owner. Salary, fuel, insurance etc.
This value includes all fixtures, fittings and assets required to generate this profit, excluding stock.
2. Total income less direct sales costs = net income then multiply this figure by 3.5. so annual income 500k less direct running costs 200k = 300k X 3.5 = 1050000 then add stock cost giving you a total approximate value.
3. If you invested a R1 000 000 (hypothetical purchase price) one would reasonably expect a 10% per annum return on a business venture so this would then equate to a net profit of 8333 per month but this would be after staff salaries and all other costs. The 2 figures (method 2 and 3) should come out pretty close and then you know that you are on the right track.
The advice above came from a local business broker, a local real estate agent who sells businesses and 2 investors. As you can imagine, the difference between methods 1 and 2/3 is quite substantial (methods 2 and 3 come out at twice the value than method 1), so I am going to work out the figure from all 3 and then average them.
Would that sound about right? Comments very welcome!
Thanks awfully.
1. A rough rule of thumb for a book shop is 18 times your average monthly Net Profit.This profit includes all benefits to owner. Salary, fuel, insurance etc.
This value includes all fixtures, fittings and assets required to generate this profit, excluding stock.
2. Total income less direct sales costs = net income then multiply this figure by 3.5. so annual income 500k less direct running costs 200k = 300k X 3.5 = 1050000 then add stock cost giving you a total approximate value.
3. If you invested a R1 000 000 (hypothetical purchase price) one would reasonably expect a 10% per annum return on a business venture so this would then equate to a net profit of 8333 per month but this would be after staff salaries and all other costs. The 2 figures (method 2 and 3) should come out pretty close and then you know that you are on the right track.
The advice above came from a local business broker, a local real estate agent who sells businesses and 2 investors. As you can imagine, the difference between methods 1 and 2/3 is quite substantial (methods 2 and 3 come out at twice the value than method 1), so I am going to work out the figure from all 3 and then average them.
Would that sound about right? Comments very welcome!
Thanks awfully.
The Birdman
New member
Are you getting a half season ticket with the profits 
KZNSeagull
Well-known member
- Thread starter
- #30
Are you getting a half season ticket with the profits
Once I have found a job then maybe. Depends where I am living though - cannot really afford anywhere in the South East sadly.
- Jul 10, 2003
- 26,318
KZNSeagull
Well-known member
- Thread starter
- #32
Shirley that depends on how much you get for the business
Not really. The Rand is dropping like a stone and I am not going to get a vast amount for the business. Going to rent for a while anyway when I come back and try and get back on the property ladder once job found and secured etc etc.
If I do get a season ticket, shall I bring over a
?