Website to help value a small business i'm thinking of purchasing

[boomer6447]

Anyone have any experience in purchasing a small business...specifically I am thinking of purchasing a Dog/Cat Kennel that also has a grooming business. I'm (obviously) going to get the services of an accountant/etc when it gets closer to negotiation, but until then I was wondering if anyone knows how to value a business like this??


I imagine there is a formula like profit times X 2, or gross times X 1, etc....but I would imagine the multiplyer would be different for different types of business. Does anyone have any websites with the info?? Or know of the top of their head how to value this? The initial discussion has been purchasing the land and the buildings, and then also purchasing the business (ie: 750K for land, plus 750K for the business)..

Anyway, I know this isn't the best place for this kind of advice, but if anyone has some pointers, tips, i'd appreciate it.

 

[krunchykrome]

Originally posted by: boomer6447
Anyone have any experience in purchasing a small business...specifically I am thinking of purchasing a Dog/Cat Kennel that also has a grooming business. I'm (obviously) going to get the services of an accountant/etc when it gets closer to negotiation, but until then I was wondering if anyone knows how to value a business like this??


I imagine there is a formula like profit times X 2, or gross times X 1, etc....but I would imagine the multiplyer would be different for different types of business. Does anyone have any websites with the info?? Or know of the top of their head how to value this? The initial discussion has been purchasing the land and the buildings, and then also purchasing the business (ie: 750K for land, plus 750K for the business)..

Anyway, I know this isn't the best place for this kind of advice, but if anyone has some pointers, tips, i'd appreciate it.

Contact a CPA firm that offers valuation services.

 

[Accipiter22]

I'll give you 7 bucks for it. 9 if any of the cats in the kennel are alive, 8 if they're dead

 

[tfinch2]

Originally posted by: krunchykrome

Originally posted by: boomer6447
Anyone have any experience in purchasing a small business...specifically I am thinking of purchasing a Dog/Cat Kennel that also has a grooming business. I'm (obviously) going to get the services of an accountant/etc when it gets closer to negotiation, but until then I was wondering if anyone knows how to value a business like this??


I imagine there is a formula like profit times X 2, or gross times X 1, etc....but I would imagine the multiplyer would be different for different types of business. Does anyone have any websites with the info?? Or know of the top of their head how to value this? The initial discussion has been purchasing the land and the buildings, and then also purchasing the business (ie: 750K for land, plus 750K for the business)..

Anyway, I know this isn't the best place for this kind of advice, but if anyone has some pointers, tips, i'd appreciate it.

Contact a CPA firm that offers valuation services.

Try to get in contact with a firm that has a CVA on staff.

 

[JSFLY]

Get audited financial statements from the business. Post them here and accounting majors such as myself will offer a valuation.

If its too small to have any, and the business has no material outstanding debt/obligations/liabilities...... then add the fair market value of all land/buildings/property/inventory together with the net present value of future aftertax profits to get a rough estimate of its value.

 

[harrkev]

My non-expert advice. Goods are worth a lot. Don't pay too much for non-tangibles. Equipment/supplies/product all have a very real value. Customer lists, repuation, etc. are all worth something, but don't over-estimate how much.

 

[boomer6447]

Originally posted by: JSFLY
Get audited financial statements from the business. Post them here and accounting majors such as myself will offer a valuation.

If its too small to have any, and the business has no material outstanding debt/obligations/liabilities...... then add the fair market value of all land/buildings/property/inventory together with the net present value of future aftertax profits to get a rough estimate of its value.

I am getting the appraisal documentation of the land, and the last three years
of the books, the last 3 years of tax documents, and the last 3 years of their personal tax returns...

Since it is a kennel, it does not really do a retail business per se, so I understand the calculation you put in your response, but how many years do I go back on the "net present value of future aftertax profits"???

Do I do that for 1 year?? 3 years??

Thanks again.

 

[JSFLY]

Originally posted by: boomer6447

Originally posted by: JSFLY
Get audited financial statements from the business. Post them here and accounting majors such as myself will offer a valuation.

If its too small to have any, and the business has no material outstanding debt/obligations/liabilities...... then add the fair market value of all land/buildings/property/inventory together with the net present value of future aftertax profits to get a rough estimate of its value.

I am getting the appraisal documentation of the land, and the last three years
of the books, the last 3 years of tax documents, and the last 3 years of their personal tax returns...

Since it is a kennel, it does not really do a retail business per se, so I understand the calculation you put in your response, but how many years do I go back on the "net present value of future aftertax profits"???

Do I do that for 1 year?? 3 years??

Thanks again.

I'd say do a conservative financial projection of profits for maybe 10 years going out or as long as you think the business will be running, whichever is longer.

You say they wanted 750k for the business itself. Does this include Property/equipment/inventory and if not, Have you asked them how they came to this valuation?

In other words, what method are they using to measure the value of the intangibles? Is there Goodwill implied?