How Much?

[Toon]

Hi.

I'm looking to buy a wholesale business (not registered) and wondered how much you think the following would be worth:

Existing domain name (although not listed on Google)
Supplier Details
Over 100 customer details
Site design and content
Current Turnover £100,000
Current Profit £25,000
Approx £1800 of retail value stock

Firstly, how much would you pay for the above and secondly, what would your advice be on buying the above?

Many thanks for your help.

 

[Alpha]

There is no single answer to this question but a lot of factors to be taken into account when deciding how much the business is worth to you.

How long has the business been trading?
What products does it sell?
what is its past record?
Does it have historic accounts signed by an accountant?
What is the total list and value of its assets?
How much repeat business does it generate?
What is the average value of sales per customer?
Does it only trade via the website or does it trade through other media?
Does it rely on the knowledge/contacts of the current owner?
What reason does the owner have to sell?

what could you bring to the business to increase its trading/profit?

and on and on

Depending upon above the business could be worth between £1800 (the only asset value you have given and for example £125k (5 x £25k) if the business continued as it was with no increase/ decrease in turnover or profits. it may be that your input could generate a lot more profit in which case it may be worth even more to you conversly if it reied on its current owner and business would be lost it could be worth a lot less!!

You would really need a full investigation into the business before a rough valuation could be ascertained and any form of offer considered.

I must admit that given the figures below the business sounds to be quite reasonable ie Turnover £100k stock £1.8 (only holding one weeks stock on average) Approx 100 customers therfore average sales per customer (£1000). Often you find that businesses which sound too good to be true ARE TOO GOOD TO BE TRUE.

If you require any further info/advice pls dont hesitate to get in touch

 

[gj]

Just to add a little to Alan's comments - if you are happy that there is ongoing business here:

If the business is not incorporated ie a limited company - I assume that is what you mean by "not registered", then you need to take out of the profit a figure for the owners time and effort, before using that profit in any earnings multiple. A quick and useful way to do this is to think purely in terms of you being an investor in the business, paying someone a commercial salary to run it for you.

Let's say that figure was £25,000 per annum, then the business makes no profit after this salary. An earnings multiple might then be 5 times nothing = nothing. In fact, 5 times earnings is rather higher than I would suggest anyone should consider paying, 3 being my top multiple except in exceptional circumstances.

If the business is incorporated, make sure you consider the profit after a fair charge for a salary for the owner - there may be a figure in for directors remuneration but if it is not a commercial salary, then make an adjustment to bring it to the figure which you would pay someone to manage the business for you.

In either case, consider also whether other members of the owners family are working in the business without a commercial salary being shown. Also make sure that you make due allowance for any additional costs that you might incur that the current owner doesn't.

At the end of the day, if you think that you can get the business for a price which is cheaper than the "cost" of you trying to get to the same stage from scratch, then it is worth considering.

Hope that helps

Graham