Thinking of selling

[Gray]

Hi everyone,

I am thinking of selling my business. I am self employed, work on my own in a lovely little salon. It is well established, and has a loyal client base. I am leaving all fixtures, fittings and stock. How do you go about getting a realistic selling price?

X

 

[littlebear]

Hi everyone,

I am thinking of selling my business. I am self employed, work on my own in a lovely little salon. It is well established, and has a loyal client base. I am leaving all fixtures, fittings and stock. How do you go about getting a realistic selling price?

X

To value a company, you get your annual revenue and multiply the revenue by 5 - 10 years

 

[nailpod]

Just get your tax guy to work one out for you there is a specific formula you use.

 

[swilks12]

Hi everyone,

I am thinking of selling my business. I am self employed, work on my own in a lovely little salon. It is well established, and has a loyal client base. I am leaving all fixtures, fittings and stock. How do you go about getting a realistic selling price?

X

Where abouts are you, im looking for a salon...

 

[Noodle]

Where abouts are you, im looking for a salon...

As selling and buying is not allowed on the site, please make direct contact with the OP by way of private message. Thanks.

 

[Beckybee]

To value a company, you get your annual revenue and multiply the revenue by 5 - 10 years

So if I turn over £100k a year you multiply 100k x between 5 and 10 to get the sale value?

 

[Carolineh]

I brought mine by one price for fixtures and fittings and other part good will and reputation, there are companies you can use but be warned they often massively over estimate the value xx

 

[BannerPenguin]

So if I turn over £100k a year you multiply 100k x between 5 and 10 to get the sale value?

I'd do 5x or 10x your profit. Not turnover.

 

[Beckybee]

I'd do 5x or 10x your profit. Not turnover.

Ok, same question. If my net profit is £50k per year, and most small businesses with 1 owner and 2 staff need to take this amount to operate, then the business is worth between £250k and £500k

If that's the case almost every small business would be up for sale I know mine and my husbands businesses would, we'd be millionaires.

I think there's a lot more to valuing a business than just a simple maths formula.
Things like where the business is based, machinery to operate the business, skill level of staff and the fact that most businesses would not be able to operate the same without the owners skill and input, how much it would cost to get to the same level of business, customer base etc all come in to play.

 

[julier]

I purchased my salon for £15k and its turnover was 48k

It's all based on fixtures and fittings mainly

 

[squidgernetball]

Net profit of £50000 isn't easy to achieve. I don't know many small businesses showing £50,000 as a net profit x

 

[ukbeauty]

It was possible as a sole trader 13 years ago, but ran as a very tight ship, with the best staff.

I think it is a lot harder now with discount online sales/groupon type deals everywhere you look and we seem to work longer and harder for less return. I was fortunate to have sold at the right time and would probably be very different now?

 

[Beckybee]

Net profit of £50000 isn't easy to achieve. I don't know many small businesses showing £50,000 as a net profit x

If you run a business and have 2 full time staff then the wages have got to be pretty close to £50k.

3 peoples full time wages at the minimum for skilled workers has got to be £15k a year each

Might be getting confused with net and gross

 

[ukbeauty]

Beckybee, that would be gross turnover.
Net profit is what is left after all the overheads, but as a sole trader the net profit included my personal salary.
Many people, including staff/Clients etc lol look/guess at the turnover of busy salons and imagine we must have a Ferrari hidden away.
The industry is not highly profitable so I had to turnover what seemed like a huge amount to achieve a fairly decent net profit.
After many many years, I still regularly evaluate my (now small) business to see how it is operating?

 

[squidgernetball]

If you run a business and have 2 full time staff then the wages have got to be pretty close to £50k.

3 peoples full time wages at the minimum for skilled workers has got to be £15k a year each

Might be getting confused with net and gross

It's your turnover and your profit you're getting confused with.

Your turnover is everything you take - in our case in the region of £120,000 - and your profit is what's left over when all your bills are paid, at the end of the year. In our case, very little.

We're limited, so our workings out for profit don't include anything like wages etc, just clear profit at the end of the year x

 

[Beckybee]

It's your turnover and your profit you're getting confused with.

Your turnover is everything you take - in our case in the region of £120,000 - and your profit is what's left over when all your bills are paid, at the end of the year. In our case, very little.

We're limited, so our workings out for profit don't include anything like wages etc, just clear profit at the end of the year x

Hi. I know what the difference between profit and turn over is, I was just getting my self confused with gross and net. Though mr p just mentioned profit no mention of net or gross. ( not being nasty when I say that X)


But going back to the original question and the answer by mr p.

Even if you take the lowest profit number which is net.
Say it's a figure of £5k.

Doing the maths given my mr p, that business is worth between £25k and £50k.

I personally would say that's far too much. It would take between 5 and 10 years to pay you back your investment. That's ok if you are still getting £1000 per week wages out of it, but who gets that sort of money out of their business.

Normally wages when self employed are only slightly better than being an employee. So why would you invest that sort of capital for such a small return.

As I said there are a lot more things to weigh up when trying to get the valuation of a business.

I dare say and I include myself in this one.... A lot of business if valued would be valued at very little, as we run them to suit our own personal needs, like health, kids and lifestyle.

 

[BannerPenguin]

Hi. I know what the difference between profit and turn over is, I was just getting my self confused with gross and net. Though mr p just mentioned profit no mention of net or gross. ( not being nasty when I say that X)


But going back to the original question and the answer by mr p.

Even if you take the lowest profit number which is net.
Say it's a figure of £5k.

Doing the maths given my mr p, that business is worth between £25k and £50k.

I personally would say that's far too much. It would take between 5 and 10 years to pay you back your investment. That's ok if you are still getting £1000 per week wages out of it, but who gets that sort of money out of their business.

Normally wages when self employed are only slightly better than being an employee. So why would you invest that sort of capital for such a small return.

As I said there are a lot more things to weigh up when trying to get the valuation of a business.

I dare say and I include myself in this one.... A lot of business if valued would be valued at very little, as we run them to suit our own personal needs, like health, kids and lifestyle.

I mean I see what you are saying, there are slightly other variants but it's a general 'rule'.
As most businesses wouldn't make any profit for first couple years and even then, might not get the custom to make it work, means they aren't making any money.

Using your £5k example, if they bought it for £25k, they're making money from day 1. Most people buy a business because they see a way they can improve and increase it's turnover and profit. They might buy it for £25k but have £10k of marketing to do which could make it a more profitable venture long term. I always say what it's worth is what anyone is willing to pay for it.

To give you an idea, I got an independent initial valuation (which I think is some way off) just for only my website for Low: $89,100.00 High: $108,900.00. Now I'd probably at least half this value or take off 2/3rds off to get to a reasonable figure. If I thought I could get those prices, I'd sell tomorrow

Edit: I'll have to find you a link to a site I came across yesterday. It's an eBay for websites and apps that are popular and people buy as passive income investments. As an example one app makes around £5,000 - £7,000 a month in ad revenue from google for 3 months and was up to nearly £100k when I looked and it had a couple of days to go on the bid.

 

[Beckybee]

Not forgetting a business like anything else is only worth what someone's will to pay.

 

[Carolineh]

Mine was only a year old when I brought it but I originally did the marketing so knew what I could do with it, also had to make a really smooth transition for existing clients, make plans for the losses and have a strategy for building it that's why I say be careful what the valuers say because as above its worth what someone will pay based on what they can do with it xx

 

[surf girl]

Anyone wanna buy mine?? 25K??

@Carolineh would you mind sharing rough figures with us about your purchase? I think it could be helpful to those reading this thread, did your plans go right with the building of the business?