Setting a valuation for a portion of our business?

[KL Smith]

Not sure if I can get a definative answer or not, but thought I'd throw it out for opinions.

When we opened our current store/gallery, we never intended on custom framing being the main focus of our business. Our main focus was on the sale of my fine art photography work. However, custom framing did add to our bottom line. We do not cut mats or frames. We have a good local source for having our mats computer cut, our glass cut and we buy all our frames from L/J, Roma, Fotiou, etc., joined.

We have come to a point where we are considering moving to a location better suited to the sale of my work, but not suited to custom framing. This leads us to consider "possibly" selling the custom framing portion of the business. Our feeling is that my wife and I couldn't handle two locations and the increased workload from the anticipated sales at the new location and I'm not interested in hiring someone for the framing side.

I don't really have an idea as to what it might be worth so I'll ask for opinions.

What we would be selling would be:

A decent location that we have occupied for 3 years, with very fair rent, that is frequented by locals.

The only real custom framer in a small town of 13,000

Custom frame sales of about 55K year

Chattles include about $2000 worth of Halogen lighting, 2 large window AC units, a 4 foot by 6 foot sizing table, corner sample displays for about 300 samples, the gallery is fully walled with painted slotwall, sales counter, a $1500 canopy over the front door, a very nice 4 x 8 foot standing sign on the lawn which cost about $1500, an assortment of 50 to 100 ready-made frames, and a data base of about 500 customers over the last 3 years we have been here.

I'm sure there are other items, but that is probably the bulk of it.

Any thoughts?

TIA

 

[Rick Granick]

Ken,
I'm not intending to be critical in any way, but realistically you are not really selling a true custom framing business, but rather a nicely-equipped space to assemble component parts. Unless the rent is extremely low, and guaranteed to stay that way, I don't see how $55K per year in sales would support a stand-alone operation. It sounds like there may be a potential market, and your mailing list does have value, but in order to make that into a custom framing operation, one would need to make a significant investment in equipment, training, etc. The cost of all-outsourced components would not provide enough profit. Also, a marketing plan would need to be implemented (at some cost) to raise sales.

It might be a good opportunity for someone with some capital to pick up where you will have nicely left off, and get a start with an established name and location.

Talk to a reputable business broker or business attorney before making any moves.

Best of luck.
Rick

 

[Richard Darling]

With the improvements and customer base, it might have some value to someone looking to expand to a 2nd location. That might be the best way to market it. Contact frameshop owners within a 50 mile radius and see if anyone shows interest. Absent a thorough analysis, you could be in a position to perhaps get 1x earnings, or possibly 1/2x revenue. But like Rick said, revenue doesn't seem to be high enough to support a stand-alone operation.

 

[KL Smith]

Rick, Richard:

Thank you for your replies. As I said, the framing is simply a component of the business that grew bigger than we expected. I do realize that 55K is not enough to call it a stand alone venture. I do suppose that an interested and motivated person could possibly increase revenues, but I am under no illusions that the "business" is worth a lot of money. Your figure of 1/2 time revenue is actually more than I had in mind.

And you are correct that the location is simply a nice gallery space and a work/assmbly area. The rent is is approximately 1k a month plus electricity. I think the real value however might be in the fact that an interested person could be up and running within a day with a client base of 500 people to market to.

One of the main reasons I am considering selling the business rather than just closing it down is that I would really like to hand off a very nice client base to someone who will serve them as well or even better than we have. We have created some wonderful relationships with many of these people and as I said, this is a very small town of only 13,000 people, so customers are not just customers, they are friends and neighbors too.

Again, sincere thanks

 

[stud d]

If there isnt any framing equipment, the space cost about 1k per month, and it is making 55 ayear I might try to sell the mailing list instead of selling the framing portion. I think selling the mailing list to another frame shop might be the best thing to do. I would speak to all framers in a 20 mile radius and see if they are interested. I would guess you may get a few hundred dollars for it. Remember there is no gaurantee that your customers will actually go to the person who purchases the list.

PL