Author Topic: Selling a Business  (Read 566 times)

BTDretire

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Selling a Business
« on: September 13, 2018, 09:45:49 AM »
 My wife has finally started talking about selling our business. I have been semi retired for
almost two years, wanting her to sell so I can fully retire.
  I don't think the business has a great value, mostly because it just generates two incomes,
 which are above the area's per capita income but still, just generates an income.
This areas per capita income is $22,400, our net incomes has averaged $40,000 over the last 6 years.
 So a business that generates a net income of $80,000, with assets of less than $10,000, no real estate.
We only sell one item and have hours of 7 days a week 10 hours a day 363 days a year.
  I don't want to finance the sale, I know that lowers the value, but I just don't want to get $20k or $30k
and then have to go back to work regaining the customer base just so I can sell it again.
 Any thoughts on how to price such a business.

FIPurpose

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Re: Selling a Business
« Reply #1 on: September 13, 2018, 01:49:45 PM »
I've started to look into buying businesses. And I've already run into a business where it would be basically buying a job. I think a business like that is worth something more than 0, but it's not going to be worth much. It sounds like you have an idea of what it'd be worth. probably in the 10-20k range.

I would think, what could you hire someone for to do your job. Subtract that out, then use that number as the business profit. So if you could hire someone to your job and profit about 10k per year afterwards with minimal time investment, you add a 2-3x multiplier and have a rough valuation. But if this is a rare opportunity for someone in your town, maybe it's worth more.

In the end, your business is only worth what someone is willing to pay. I wouldn't feel bad if your business isn't worth much, it provided many years of salary for you.

Smokystache

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Re: Selling a Business
« Reply #2 on: September 14, 2018, 08:00:02 AM »
I'm wracking my brain to come up with what your product must be (only 1 item, open 7 days a week, open all year except Christmas and ??). I can understand if you don't want to share - but I thought I'd ask.

Is this something that someone else who already has to staff a storefront could add to their offerings? That would mean they wouldn't have any additional expenses and could simply, easily generate something close to your gross profits now. Or is there some specialized knowledge in selling, servicing the product?

SeattleCPA

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Re: Selling a Business
« Reply #3 on: September 14, 2018, 08:08:40 AM »
My wife has finally started talking about selling our business. I have been semi retired for
almost two years, wanting her to sell so I can fully retire.
  I don't think the business has a great value, mostly because it just generates two incomes,
 which are above the area's per capita income but still, just generates an income.
This areas per capita income is $22,400, our net incomes has averaged $40,000 over the last 6 years.
 So a business that generates a net income of $80,000, with assets of less than $10,000, no real estate.
We only sell one item and have hours of 7 days a week 10 hours a day 363 days a year.
  I don't want to finance the sale, I know that lowers the value, but I just don't want to get $20k or $30k
and then have to go back to work regaining the customer base just so I can sell it again.
 Any thoughts on how to price such a business.

So if I understand, you have a business that requires 70 hours of work every week of year with no holidays (well, except for 2 days) and truly provides no time off.

I assume you pay SE taxes out of the $80K.

If that's the case, the equivalent wage looks to me like $17-$18 an hour straight time. And with no benefits like a pension or health insurance.

I would think in many areas of the country that such a business is worth little.

Surely, though, in other areas--like the one you're in so it sounds--the business lets someone or a couple of people make an above average living and stay within what's probably a low cost of living area. The problem is, someone who's going to make $17 to $18 an hour probably doesn't have that much financial cushion. E.g., even if the business is worth, say, $20K, someone making $17 an hour probably can hardly afford to pay that price for the business at that $17 or $18 an hour wage rate.

A business broker who sells CPA firms tells people this: Whatever you sell a CPA firm for needs to allow for new owner to make a living... make the payments on a loan... and leave some leftover cushion. That line of thinking may be useful... and probably suggests (as you hint) that even in a LCOL area, the value is modest.