Comments on: How to value your business …

By: Corona Homes

Corona Homes — Sat, 09 Jan 2010 20:48:09 +0000

Never thought about what my business is worth or to put a number on it. I will have to look into so formulas that are being used in real estate brokerage services. Very insightful topic going to have too do some research. I]m hoping 2x annual sales is light.

By: Some business valuation advice …- 7million7years

Some business valuation advice …- 7million7years — Sun, 20 Dec 2009 08:15:21 +0000

[...] we’re on the subject, here is some good advice on valuing (and, improving the value of) you business from a business [...]

By: Adrian

Adrian — Sat, 19 Dec 2009 04:07:23 +0000

@ Modder – … yet so many do [i.e. work for what amounts to 'slave wages' for the privilege to "own and run a business that requires you to be present 50-60 hrs a week"]

BTW: You CAN add to my ‘formula’ some amount for stock and other assets that the business may have, but you must value them realisitically (which usually has NOTHING to do with what the guy may have paid for them, some time before).

@ Evan – “it all depends” … indeed!

By: Evan

Evan — Fri, 18 Dec 2009 16:45:57 +0000

AJC,

Hmmm it all depends! If it is for estate planning purposes under the guise of a buy-sell higher might actually be the right answer. If it is for estate planning purposes for the IRS (or Aussie equivilent) we are looking for LOWWWWWWWWWWWWWWWWWWWWWWWw

By: Modder

Modder — Fri, 18 Dec 2009 15:29:39 +0000

One of my in-laws recently tried to buy a retail store. The owner insisted on getting the book value of the company (assets less liabilities) plus a premium – around $500k or so. Problem was that most of the “value” in the book value was in improvements the guy made to the store – which are near worthless if you want to redo the store – and a bunch of really old accounts receivable (stuff he should have written off). Most importantly, the guy was only pulling an intermittent cash flow from the place after all expenses, non-owner salaries etc of $10-20k per year. Using your formula, my in-law should not offer more than $70-200k for the place – a far cry from the $500k the guy was looking for. Plus, $10-20k is not worth the time, risk it takes to own and run a business that requires you to be present 50-60 hrs a week…

By: Adrian

Adrian — Fri, 18 Dec 2009 03:40:10 +0000

@ Evan – … And, So It Was Written [by AJC]

You’ll need a more authoritative estimate than that! But, for estate planning purposes are you looking for a higher or lower valuation

@ Ill Liquidity – Somewhere in the dusty archives of this blog is a post listing the 10 dumbest sites to make $1m (Incl. the infamous Million Dollar Homepage and something to do with little red noses for your car’s radio antenna) … given the obviously low bar for million dollar ideas, surely a multimillion dollar one should be a snap for you?!

By: ill liquidity

ill liquidity — Thu, 17 Dec 2009 19:29:55 +0000

Thanks for this post, AJC. Now if only I had a business idea! A bunch of great ideas are already taken: http://www.webhostingsearch.com/blog/10-stupid-online-business-ideas-0360

maybe 7millionDollarHomepage.com?

By: Evan

Evan — Thu, 17 Dec 2009 14:44:34 +0000

We are in the midst of obtaining a value on a Dental practice, for purposes of gifting it (for estate tax purposes)….and we actually got a valuation report estimate of 8 grand! Crazy right? Your method seems easy enough, its just whether the IRS will take the argument, AJC Said so lol