Hi jaynfinn,
It would be probably in your best interests to work with a broker
unless you are confident that you have the expertise to make sure
you've crossed all your t's and dotted all your i's, especially if you
decide to do the financing yourself. You've worked hard to build the
business and it would be a shame to not get the best possible price
you can.
Because you have a business with no hard assets or inventory, you're
basically selling goodwill.
From the following page you'll find a synopsis of an article titled
“Pricing the Personal Service Business.” Here are some quotes from
that page:
"American appraisers and brokers are increasingly focused on market
data in pricing small businesses. Two statistics collation services
(Bizcomps and Pratts Stats) are amassing a significant volume of
transaction data.
The average multiple of seller’s discretionary cash (SDC) for all
businesses on the Bizcomps database was 2.42, i.e. a business with SDC
of $100,000 p.a. would sell for $242,000. The median was 2.03.
However, the average multiple for personal service businesses was in
the vicinity of 1.5. It must be remembered that typically this type of
business has little in the way of plant and stock so that the goodwill
component of the price may be quite high – the article reports a study
where intangibles comprise on average over 80% of the total price."
Clyth MacLeod Ltd - Articles and Newsletters
http://www.clythbiz.co.nz/view_news.cfm?key=27
Now, I looked for a definition of "seller's discretionary cash" (SDC)
and found out that there are certain operational expenses that a buyer
could avoid once s/he has purchased the business. In your case, you
state that you have a few part-time employees. It would seem that
because your annual expenses are so minimal that these employees are
not essential to making a good profit. It would be up to a new owner
to decide if s/he needed to keep on or hire part-time help.
According to the Clyth MacLeod site, you would multiply the SDC by a
multiple of 1.5 to come up with a selling price of $75,000.
To make things simple, let's say that the employee expenses were
$25,000 in a given year, and net profit was $25,000 in that same year,
you could add the two together, coming up with $50,000 SDC.
By taking your average of $86,000, deducting your overhead, and using
Bizcomps' multiple of 1.5, you'd be looking at a price in the vicinity
of $121,500. Of course a broker could give you a more exact figure
once s/he's had a chance to examine your business records.
There other factors to consider, such as what competion there might be
in your area. A good broker will work with you to determine the best
possible asking price.
Buyer Frequently Asked Questions
http://www.ventureforyou.com/buyer_faqs.html#Q2
I've sold a few small businesses in my time -- a catering business,
two restaurants, and a video rentals store. I found a web page from
Ash Associates, Inc. which offers good advice about selling a business
(and is exactly how I did it). Because you deal in a service which
requires no hard assets, many of the ten items listed here will not
apply to you, but a few do. Those would include items one and two, and
part of three.
"Selling a Business"
http://www.bbsco.com/selling.htm
Pro-Biz Marketing has some good advice for you, as well. They include
information about why it's a good idea to finance the sale yourself,
one of the most persuasive reasons being "the tax consequences of an
all cash deal!"
Tips For Selling Businesses
http://www.probizusa.com/sell10.htm
Hopefully, all the above will assist you in your sale. Don't hesitate
to use your "Clarification of Answer" button if you need further
information.
I wish you well,
revbrenda1st
Search Strategy:
selling small business
://www.google.com/search?hl=en&ie=UTF-8&oe=UTF-8&q=selling+small+business&btnG=Google+Search
seller’s discretionary cash
://www.google.com/search?hl=en&ie=UTF-8&oe=UTF-8&q=seller%E2%80%99s+discretionary+cash&btnG=Google+Search |
