Valueing a firewood business

[Tom11]

Hi. I've been thinking about selling my firewood business but how do you value it and where do you advertise it?

Shifting out about 200 tonne a year, would come with client list, books to show year on year growth, tractor with front grab, processor and about 100 tonne of Ash. (Equipment & timber worth around 17k on there own)

Suggestions welcome

[Michael C]

Hi. I've been thinking about selling my firewood business but how do you value it and where do you advertise it?

Shifting out about 200 tonne a year, would come with client list, books to show year on year growth, tractor with front grab, processor and about 100 tonne of Ash. (Equipment & timber worth around 17k on there own)

Suggestions welcome

 

You might be better breaking it up to sell it. You will get plenty of takers for the ash and the machinery and a localish guy (that already has the machinery) might buy the 'client list'

[Billy68]

A good starting point for valuation is

 

Value of machinery + between 1 and 3 x annual profit + stock at value (ie timber stocks at time of sale). The profit multiplier depends on how long you have been trading, what the general trend in sales has been over the past few years plus the standard of your customer records etc (eg names, addresses, frequency of order). That gives you a starting price to advertise at, then it really depends on who is looking to buy that kind of business at the moment and ultimately what people are prepared to pay.

 

In terms of where to advertise it, start with on here (you know you're talking to the right kind of audience), then somewhere general like businessesforsale.com or daltons - wouln't bother using an agent to sell it for you, they charge a hefty commission and don't tend to deliver.

 

If your circumstances allow, offer a hand over period, that way the new owner can be gently introduced to all your long term regular customers (since people buy from people), your suppliers, plus any little teething problems and questions along the way. It might not increase the price of the sale, but it will help to sell it.

 

Only other advice would be to have a box ready with all your previous accts, customer records, staff info (if you have any) and list of machinery - this way you've got something organised to show anyone that's seriously interested.

Edited May 22, 2011 by Billy68

[windfall]

Well put Billy.

 

I would add that you may consider a gradual buy out, for example the new owner agrees to pay you £xxxx per month for 2 years and signs a personal agreement to pay you the money even if the business folds. You have to be sure that the person buying has the skills to do the job and not let it go tits up otherwise you have to do down the court route to enfore the personal agreement.

 

Its a very common way to sell a business.

[Stereo]

What you have to think about when valuing a business is how much work needs to go in to earn the income. If it is a full time job for one person for an average wage then the business is virtually worthless. Why not just get a job. Also, barriers to entry. What is to stop your buyer from starting from scratch and not paying you the premium? You have the customer list and I suspect that is about it. He / she could buy machinery any day of the week and it may be better than what you are offering (be honest).

 

The key to building a business with worth is systems which work. It's something that Joe Bloggs can't just replicate with a bit of practice.

 

The harsh fact is that most one man band businesses are worthless as they rely on that man to generate the profit, not the processes and systems of the company or business itself.

[windfall]

fair point

[Tom11]

What you have to think about when valuing a business is how much work needs to go in to earn the income. If it is a full time job for one person for an average wage then the business is virtually worthless. Why not just get a job. Also, barriers to entry. What is to stop your buyer from starting from scratch and not paying you the premium? You have the customer list and I suspect that is about it. He / she could buy machinery any day of the week and it may be better than what you are offering (be honest).

 

The key to building a business with worth is systems which work. It's something that Joe Bloggs can't just replicate with a bit of practice.

 

The harsh fact is that most one man band businesses are worthless as they rely on that man to generate the profit, not the processes and systems of the company or business itself.

 

Completely accept what your saying but if its something someone interested in doing then I would think paying a premium - provided its not excessive - would be acceptable to many in order to simply walk into a yard thats stacked with timber, has a nice pile already split and people ready to buy it. It's just easy isn't it!

[likeitorlumpit]

How do you really value it

There's nothing to stop you selling then setting up again and getting your old customers back- provided they are loyal to you.

That would be the risk to anyone buying your business.

Mind you- if you had a busy intersection site that generated passing trade and you had long term contracts in place for cord wood supply and for say log nets then you are talking a different valuation.

[Tom11]

How do you really value it

There's nothing to stop you selling then setting up again and getting your old customers back- provided they are loyal to you.

That would be the risk to anyone buying your business.

Mind you- if you had a busy intersection site that generated passing trade and you had long term contracts in place for cord wood supply and for say log nets then you are talking a different valuation.

 

Again I completely agree with where you're coming from, but really there would be little point in selling everything and handing over the rent of the yard only to set up again. I really wouldn't be thinking about selling it if I wanted to keep doing it!

[Billy68]

usually a sale agreement will have a none compertition clause , say a period of 12 months were you cannot engage in the same busines activity or approach any client