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Thread: buying business from employer. looking for ballpark business buyout value

  1. #1

    Default buying business from employer. looking for ballpark business buyout value

    looking to buy a business i currently work for. 2 employees being me the shop tech, and the owner being the field tech. i currently make %50 labor in house shop commission as a 1099. If I buy the business I will take all the shop labor and shop parts expenses, rent, etc. The owner will branch off taking the field clients which I only service repairs taken to the shop. Im not concerned about him starting somewhere else and taking all the clients. Any business relationships will remain mostly the same as he will bring all work in to me in the furture besides software and network configurations he currently does.

    Attached are the income and expense sheets i was given. The anomalies of jul and sept were eyeball figured out of the written data below which is what i would be taking over. As far as concrete data the shop takes in about 60k credit transactions for the past 3 years. He said cash would be 10-15k additional which makes sense. in house checks im not sure , but probably rather low. It could be true as there is a lot of payments mailed in I don't see , but I dont really see it making up the 115k gross total as in the report below written in pencil.

    I get the shop inventory which is probably sub 5k. rent is about 375 mo. I currently take home about 27k a year.

    In my eyes I will take on expenses, but effectively double my salary immediately strictly via labor, not to mention part sales, and its going to be the most turn key operation possible as nothing will really change.

    We have not hired a broker to determine any values. I plan to pay him a flat price outright. He says he is being very fair, but obviously people overvalue their business. What would be some reasonable asking prices for this business. 10k, 50k, 100k, 200k? Or how many years should it take in additional revenue to pay off the investment.
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    Last edited by newbusinessownerqwer; 03-09-2018 at 09:02 PM.

  2. #2
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    So many questions.

    How much is the current owner asking?
    Are the provided numbers only for the shop income then? Or do they cover both shop and field? I'm assuming shop, but you know what can happen when we assume.
    Are there proper financial statements and tax returns available? How much cash sales does the business do that doesn't get reported?
    What assets are included in the sale?
    Why is the business being split/sold?
    Why is he staying on as a possible competitor?
    Will the seller finance any portion of the sale? You said you would pay cash but this is still good to know.

    I've got a lot more questions but this is a good starting point.
    Brad Miedema
    Fulcrum Saw & Tool

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    There are too many variables to really know how to price that but based on the limited information I would think 75K would be a fair price. That would let you return your investment in 3 years. It would be two easy to rent a place and start in on your own for any more than that. You could probably do that for 15K and make as much money even if you only attracted and did half the business.
    Ray Badger, Turbo Technologies, Inc.
    www.TurboTurf.com www.IceControlSprayers.com

  4. #4

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    Thank you very much for your responses.
    The 291k/119k figure is including both sides of the business.
    The written 115k/57 figure is his estimation for the shop side I would take over minus some unusual parts sales volume from a client that I will keep
    hes asking 140k
    There are proper financial statements available.
    The 60k credit is what i pulled off the history from our credit terminal that is all shop income
    It is estimated 15k is cash shop labor and not recorded. I plan to record it
    Assets include all tools and parts needed to run the shop, website, yelp, client list. The business has been steady for over 15years.
    The owner wishes to have less responsibility and start working on a secondary career. He will continue to make pick up and deliveries to the shop from the business clients and home users. He is staying in the field to do the field work he enjoys and maintain the relationships and contracts with our business clients. I prefer to be in my own domain away from traveling to businesses under hourly rate pressure.
    Im not sure about the seller financing a portion of the sale. I was going to pay in full with bitcoin. Not worried about market value as its fixed into usd.
    On the lowest possible end just taking the %100 shop labor into consideration It sounds like 3years at 27k additional funds like you said (my 50% yearly avg annual for the last 5 years) would make sense for a sale price of 75/80k. Im just using this as the most straight forward figure I can actually make full sense of the data.
    You are right about starting my own business. What holds me back there is I would want to be far enough away to not be a competitor, start up taxes ,getting my funds into real $ with all the exchange fess and the capital gains will be a chore. slowly building up a client list. I know my services are stellar and would grow in time.
    Last edited by newbusinessownerqwer; 03-10-2018 at 05:52 PM.

  5. #5
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    Let me revisit a few questions as I'm confused (it's Saturday night so it's not hard to do):

    1) What product or service does this company provide?
    2) According to the financials, what is the free cash flow before owner's benefit is calculated? You may need to recast the numbers to get the real amount.
    3) How was the $140K asking price arrived at?
    4) Does the $140K asking price include the undocumented $15,000 of cash payments?
    5) How difficult and expensive would it be for someone to setup across the road from you as direct competition?

    With regards to the seller financing, I would personally require the seller take a large note to ensure that he doesn't set up shop to compete with you after you take over.

    Being a one man show will require that you spend time on the road talking with customers and learning how they operate. Staying in the shop will not allow you to develop relationships with your customers and key personnel. At best, you will probably only get 55-60% of your available time to put into doing the paying work (I put in about 60 hours this week and less than 30 were spent in the shop while the rest was spent in the truck driving to and from customers).

    As for your original question, I'm still unsure as to how to place a value on it. Single person operations generally aren't worth very much as the owner/proprietor is the business.
    Brad Miedema
    Fulcrum Saw & Tool

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