evaluating a business that's for sale

[GeneWilliams]

Hello all,
There's a shop that may be coming up for sale and I'm speaking to the owner about purchasing it. I'm sure she's going to come up with a figure, but how do I decide on what it is worth? I know that she owns the building, so that can be figured out by pulling comparable sales. A portion of her business is restoration though, which I'm not sure I want to do (I KNOW I don't know how), so a history of sales in that area aren't much good to me are they? I don't think she has much equipment (no saw, joiner or CMC). Maybe the only thing that's worth $$$ is the building and the fact that existing clients will come back. There's a lot going through my head right now about this... I posted a job wanted message a few days ago... A change is coming I just don't know what it is yet... Anyway, any input on placing a value on this business would be appreciated!

Gene Williams, CPF
Mitre & Bevel

[Emibub]

This was recently discussed.....hope the link works. Very valuable information there. Good luck!


Buying an existing business (http://thegrumble.com/cgi-bin/ultimatebb.cgi?ubb=get_topic;f=1;t=004411)

[johnc]

Gene,

My suggestion would be to find a local business broker and ask him for his advice/assistance. They have tons of knowledge about valuating a business. Also, if you have a relationship with a bank, the commercial lender will be full of good information for you. He will probably educate you about buying a business, and he'll be on your side! His information should also be free. A third possibility for information would be your local small business association office, or a SCORE office. SCORE is a free service offered by the feds. It is retired business guys that give guys like you free business advice. The SCORE office will be in the phone book under federal agencies. SCORE stands for Service Corps of Retired Executives, I think. FYI, the banks will not be crazy about loaning money for "good will". That is, a customer list that may or may not stay loyal to the business. The banks usually like to loan money for furniture fixtures and other assets. Good luck! John C.

[johnc]

Oh Gene, one more thing.

Hire a good accountant to take a close look at the books. Often, all income is not reported, and the previous owner will try to tell you how much money was made, but was not reported. This income cannot be accounted for in his bookkeeping.

[AWG]

Check out the company's books - then have an accountant look at them.

Check to see if a large percentage of the store's business is coming from one sourde - is there a commercial account that's worth 20% of the business? If so, can you maintain that account?

Check for any outstanding liens or other financial issues, including any issues or problems with vendors and anyone you may do business with.

Hire a lawyer and have them check everything out THOUROUGLY. Look at everything - and then look at it again.