How much is a business worth

[Busy Daddy]

Is there a fomula to work out how much a business is worth

[ballibeg]

Small business? 3x annual profit.

[Busy Daddy]

Thanks

[Mick Dempsey]

This has been discussed before.

Does the business have contracts? If it's just regular clients then it's worth the machinery and a small amount for goodwill.

[treequip]

If you are buying or selling a business speak to an accountant for a valuation

[ballibeg]

It's one of those subjects that no one will agree on, buyer, seller and especially accountants!

[Kev Stephenson]

Define what the business is.

 

E.g's

 

A contract climber runs a business which will make a basic wage plus profit however that 'business' is worth nothing without the climber.

 

If you run a team or teams of lads, you personally are not out on the tools or could easily be replaced and you have a number of contracts with time left on them then you have a business which could be run by someone else and therefore it has a value.

 

A lot of people on here will be somewhere between the 2 examples. Generally if you are the key player in the business and your personal reputation or ability is what gets you the customers then there is very little to sell as you are not being sold.

 

I 'bought' a gardening business to run along side my tree business at the beginning of the year. I knew what they needed from me with regards to resource and financial input (yard, secure storage, vehicle, insurances, etc), the staff were to transfer with the business (apart from the owner who had taken a back seat for the last 12 months anyway due to ill health) and they had a number of decent rolling contracts covering 80% of their working week. I had seen the books covering the last few years and according to these it had made little to no profit (and taken little to no cash!!) so I bought the business for 50% of the new asset value (i.e. a £600 mower for £300 and so on for all machinery regardless of age). They now operate as a fairly self sufficient bolt on business, make a profit, give me a labour resource when needed with the tree team, I have more to offer my current customers and a number of new high end tree work customers.

 

The stress is higher (staff!!!), I have had to go VAT registered but profits are up and I have a business with a worth. I go out with which ever team needs me or don't go out at all if I choose. I do less late night pricing as I can arrange it during the day since I am not climbing and can take time off without making no money at all. For me it works but I have always been better at business than climbing.

[john k]

Is there a fomula to work out how much a business is worth

 

 

There are, but they don't really mean much. As with anything it's worth precisely what someone will pay for it, not a penny more and not a penny less.

 

Most arb businesses don't really have any value apart from some assets and maybe a nominal amount for goodwill and a list of past clients. Maybe a bit more if they have guaranteed long term contracts.

 

If you do buy or sell a business it's well worth investing in a good solicitor to write your contract, especially if there are any stage payments or ongoing involvement of the seller. It will cost a bit, but in my experience it's money well spent.

[aspenarb]

Is there a fomula to work out how much a business is worth

 

The only real value will be its tangible assets like the yard and kit, the intangible in this day and age are worth virtually nothing.

 

Bob

[kevinjohnsonmbe]

Define what the business is.

 

E.g's

 

A contract climber runs a business which will make a basic wage plus profit however that 'business' is worth nothing without the climber.

 

If you run a team or teams of lads, you personally are not out on the tools or could easily be replaced and you have a number of contracts with time left on them then you have a business which could be run by someone else and therefore it has a value.

 

A lot of people on here will be somewhere between the 2 examples. Generally if you are the key player in the business and your personal reputation or ability is what gets you the customers then there is very little to sell as you are not being sold.

 

I 'bought' a gardening business to run along side my tree business at the beginning of the year. I knew what they needed from me with regards to resource and financial input (yard, secure storage, vehicle, insurances, etc), the staff were to transfer with the business (apart from the owner who had taken a back seat for the last 12 months anyway due to ill health) and they had a number of decent rolling contracts covering 80% of their working week. I had seen the books covering the last few years and according to these it had made little to no profit (and taken little to no cash!!) so I bought the business for 50% of the new asset value (i.e. a £600 mower for £300 and so on for all machinery regardless of age). They now operate as a fairly self sufficient bolt on business, make a profit, give me a labour resource when needed with the tree team, I have more to offer my current customers and a number of new high end tree work customers.

 

The stress is higher (staff!!!), I have had to go VAT registered but profits are up and I have a business with a worth. I go out with which ever team needs me or don't go out at all if I choose. I do less late night pricing as I can arrange it during the day since I am not climbing and can take time off without making no money at all. For me it works but I have always been better at business than climbing.

 

 

That sounds like a good arrangement. Good post 👍🏻