advice on selling my business

[stevesshop]

looking for advice i have a trade and retail outlet which over the last 4 years has changhed from £200000 turnover to£500000 turnover generating a gross profit of £130000 and a net of £75000 less my wages this year my estimated turnover will be £700000 and the business will be able to be sold leasehold or freehold.iIwas wondering what sort of price should the business sell for and what is the best way to advertise it. Any advice would be greatly appreciated

[Ozzy]

Hi Steve,
There are quite a few agents who specialise in selling businesses.

A quick Google has shown the following which I have heard of...
http://www.business-sale.com/[
http://www.churchfield.co.uk/
http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1074400490

Hope this helps,

[MikeH]

Get some professioanl advice. The value of the business will depend on more than just the figures that you have supplied. Any guesstimates given will be exactly that - a guess.

Mike.

[gj]

Mike is quite right - you should get some professional advice on this.

But to give you some idea of a possible value:

What a buyer of a business gets is the possibility of future profits from that business - possibility being the operative word. The seller is asking the buyer to take a gamble on the future profits.

If your profits are £75,000 and sustainable, and a fair "wage" for someone running the business is say £40,000, then a prospective buyer might feel that there is the chance of an ongoing profit of £35,000 from the business. Depending on the nature of the business, they might then pay some kind of multiple for that goodwill - I have seen multiples as high as 8, but I wouldn't normally recommend anyone paying more than perhaps 2 times. So maybe someone would pay £70,000 for the goodwill, plus the value of the leasehold/freehold, plus stock in trade (usually at cost), plus fixtures and fittings at open marekt value. However, for a some businesses the goodwill and the lease/freehold value are almost one and the same.

And then having said all of that, the real value is what you can get for it. You need to find the person who is willing to pay the highest price for the business - that is probably going to come from maximum exposure, which is perhaps where the agents come in.

HTH - a bit

Graham

[mark h]

Steve,

Funnily enough, I received a letter this morning from a business transfer agency based in Sussex. They wanted to know if I wanted to sell my property business as I was one of 5 firms they have identified for their clients.

I am not interested in selling at the moment but I still spoke to them. I asked the guy in the agents how they work out what my business would be worth and he said simple- whatever we can get away with with!

However he did tell me that a common rule of thumb for them is to value a business at approx. 3 times profits.
He was very,very clear in telling me that this was only a guide and would depend on the number of years traded and the number of years positve profit and growth.

Not to mention between 3 and 6 months due dilligence.

Cheers...........Mark

[winton50]

A Word of caution on the subject of agents.

most charge an upfront fee as well as a percentage and some may over inflate their initial valuation to get your business and then later when it doesn't sell you still have paid them a larger upfront than other agencies.

I was amazed at the differing valuations on my business but generally the higher fees resulted in higher valuations.