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Thread: Help me figure out what my Business is worth and what I should sell it for.

  1. #11
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    Quote Originally Posted by Freelancier View Post
    I'd adjust one of your assumptions, Brad. $40K is just the start of the number when you hire someone. Figure another 8% in taxes on them, plus you'll need to get them at least a basic healthcare policy (not because it's required, but because you don't want them to jump so easily after you teach them enough to run the business). So figure that $40K is really more like $50K at the end of a year. And maybe you'll also give them targets to hit and a bonus based on that, so maybe it might be as much as $60K if they hit a reasonable target.
    I did include the employer part of taxes and employment insurance. It's buried in there, but I did factor it in. I did forget about WSIB which adds an additional 3% or $1,200 to the employee cost. Thanks for pointing that out. A second set of eyes is always good to have around.

    I didn't factor in health insurance due to the difference in the Canadian and US health systems. We're not required to provide insurance outside of WSIB. Given that this is primarily a desk job, I would probably include dental and eye coverage as an employer paid benefit (not insurance) up to $2,000/year to start and revisit after the first year. So let's figure that employee cost would be $50K/year then. Doesn't change the number enough for me to be overly concerned at this point. I think I left enough wiggle room in their for an additional $2-3K/month unexpected expenses.

    I also left out bonuses as I believe that is something that is earned and is a gift to an employee. Not to mention the minority ownership after 3 years and probably a bump in salary during years 2 and 3.
    Brad Miedema
    Fulcrum Saw & Tool

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    Hi All,

    Some great advice here given. But ..... if I was the individual about to review your company for purchase, my biggest question I would have is, what am I paying for? If there is NO inventory held, no other assets to purchase, no systems to invest in and no brand to jump behind for Goodwill and contracts with a supplier that would probably drop ship for any interested party. What would I be buying? A website? Unless the website had a ridiculously high number of repeat customers that was generating the income outlined, and not unique customers based on the current owners marketing efforts, I'm not sure how the business could be valued so high.
    <removed>

    Keep well.
    Last edited by Harold Mansfield; 10-19-2015 at 09:32 PM. Reason: Link Drop

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    What would I be buying? A website?
    That's one way to look at it, but it's not seeing the full picture.

    Getting the recent growth with limited advertising says that there's some level of brand awareness already... you're buying that.
    Many manufacturers don't love drop-ship arrangements. Having those established relationships with manufacturers who are producing what your clients want... you're buying that.
    The time it took to customize the software and load all the information into the database so that things could be sold... you're buying that.
    The Facebook network already built ready to receive your next advertising initiative... you're buying that.

    All that is a cost when you start from ground zero, either in time or in dollars. It's not unreasonable to be paid for that.
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    We do not have the full picture, or am I missing it somewhere? Is there actual brand loyalty? Or is this just speculation? What are the repeat customers each month versus the unique visitors? Facebook networks do not translate to sales. If so, what is the conversion rate? These are all questions that need to be answered that I do not believe are available. They need to be quantified if you are putting the value in this part of the business in order to monetize it for sale. If you can't monetize it with statistics, it's just he said / she said.

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    Quote Originally Posted by Thinkbooks View Post
    it's just he said / she said.
    I fully agree with every question that you have and every single detail, if this were to be a real transaction, would need to be both qualified and quantified.

    I wrote what I did mostly as a fun exercise. I made a lot of assumptions and left some details out that are better suited to be worked out during a due diligence period.
    Brad Miedema
    Fulcrum Saw & Tool

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    you could use the Price/Earning Ratio, times the growth of your business.
    you could use all the formula to calculate the value of your business.
    But how much do u want for your business? That's the question
    And how much are people willing to pay for your business? I guess that's the answer.

    You could try to sell your business to established business which has sufficient funds, find companies who link up buyers with the right sellers which may cost you some money.


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