how do you value a business

[firewoodman]

how do you put a value on your business to sell it.

 

or in our industry does it make sense to dismantle the company and sell of all machinery?

[Steve Bullman]

isnt it 3 times the annual profit? thinking of selling up?

[Graham]

I once sold a business before starting up again in a smaller way so I'll just tell you how mine was valued.

 

I did work for several LAs, but only on contract to one of them, and domestic work. I sold to a company who wanted to expand into arboriculture as they were solely into timber. They took on my employees as they were obviously known to LA clients and were good lads to boot. The LA side is the only 'goodwill' part of the business as the domestic side is based, I think, on how well you come over to a prospective client when you quote.

 

We came to an agreement on the value of machinery and the goodwill + existing LA work.

 

I had to sign a legal document that I couldn't start up again within a radius of 50 miles or within 3 years if in the same area. Otherwise what is to stop you selling one day and the next contacting all your customers and telling them 'I'm still here, business as usual....just a different co. name.

 

Don't know if any of the above answers the question:confused1:

[b101uk]

It may have been 3 times annual profit, but you cannot apply that now due to the shift & predicted climate over the next 3 years, as it is now the only contracts on-going will have value, ware as past performance in the domestic market will have far less value as it in decline with no imposed contractual loyalty, likewise with expecting work from national building companies etc based on past performance.

 

Also over time the cost of machinery will fall disproportional to prior years as there will be more machinery on the market & fewer buyers as more people sell-up or go into administration.

[Mick Stockbridge]

how do you put a value on your business to sell it.

 

or in our industry does it make sense to dismantle the company and sell of all machinery?

 

If you do sell youre machinery dont forget capital gains tax.

[Steve Bullman]

If you do sell youre machinery dont forget capital gains tax.

 

what gains are there to be made on used machinery? or am i misunderstanding the whole concept of capital gains?

[Andy Gentle]

From my experience a lot depends on there being a buyer about at the right time who wants your business, if not you may get interest but not at the price you want. I bought another tree surgery business about 5 yrs ago and basically bought it for the value of the kit with very little goodwill which was about 50% of the asking price but the guy sold it to me so I guess he did'nt have a better offer. As someone else mentioned it's going to be hard to look at past performance with whats looming ahead.

[firewoodman]

isnt it 3 times the annual profit? thinking of selling up?

 

having spent time at home with the kids,i have found this to be invaluable.

 

when working i spend a lot of time working for what seems not much gain, and when i get home the kids are in bed.

 

i work 6 days a week and would lke to work less.

 

customers this year have become a pain in the ar5e since i put the prices up.

 

fact is they are going up again this year as i feel i still dont get enough money for the amount of work which is put in.

 

if you look on the business for sale websites the price does not reflect the profit

[Mick Stockbridge]

what gains are there to be made on used machinery? or am i misunderstanding the whole concept of capital gains?

 

I dont understand it very well, but when you buy machinery youre allowed tax relief. If you sell it before end of life then its liable for some of that tax relief back. Thats the way my accountant explained it.

[Steve Bullman]

As someone else mentioned it's going to be hard to look at past performance with whats looming ahead.

 

certainly for tree surgery....but for firewood i dont think the recession would have quite so much of an impact on the price giving the increase of firewood sales? thats assuming you have a good source of firewood