sell or expand

[stephen378]

i took over a business selling paints and industrial coatings 5 years ago it was turning 180000 a year and making a loss of 30000 a year it has steadily grown over the last 5 years last year turning 580000 and profits of 118000 not accounting my wages should i consider selling if so a guide price or should i try on increase sales and profits this year expected turnover 750000 and sell then any advice would be greatly appreciated . Also i own the property the business is on and should i sell freehold or lease the property to make the sale more attractive to purchasers

 

[Jayne]

Hi,

We offered our business both ways, either buy biz and rent from us or buy the whole lot. It's up to you if you want to keep it as an investment.

Our Estate Agent told us, we would sell it quicker just selling the biz, but to offer both ways. We had more viewing for freehold than the lease hold and we have sold it freehold too, this is why I say to people sell it yourself and don't listen to estate agents.. :lol:

There's a chap on here called Gary Brown, he may be able to help you make your mind up. He does business valuations and specialises in what you are wanting to know.

Jayne

 

[Ian J]

should i consider selling

It's a very unusual question as whilst anyone can offer an opinion on what the business might be worth, only you can decide whether you should consider selling as you haven't given us anough detail on which to base an opinion.

Are you 25 or 65 ?
Are you in good or poor health ?
What would you do with the proceeds of sale ?
What do you want to do with your life ?

All of the above and more are factors that need to be considered when thinking about whether you should consider selling.

If your business has made over £100,000 profit on sales of £500,000 what sort of profit would it make on your forecast £750,000 as if it is significantly more you shouldn't think of selling until you've reached that milestone as it is much easier to sell a business on what it has achieved rather than what it may achieve in the future. It would also be worth much more if sold on the basis of a multiple of profits.

 

[stephen378]

thanks for the advice by the way im 32 and would be hoping to sell for around 200000 business or 400000 with property if this is a realistic price id then take a year out travelling and hope to find another idea for a business venture

 

[DuaneJackson]

I think you can add your drawings to the profit figure, assuming you are drawing a good salary this would bump them up a bit.

I strong suggest you have a chat with Steve Roberts, he'll be able to give you an idea of what kind of figure you could get and what to do to increase it - he'd also be able to find you a buyer.

 

[Steve Roberts]

i took over a business selling paints and industrial coatings 5 years ago it was turning 180000 a year and making a loss of 30000 a year it has steadily grown over the last 5 years last year turning 580000 and profits of 118000 not accounting my wages should i consider selling if so a guide price or should i try on increase sales and profits this year expected turnover 750000 and sell then any advice would be greatly appreciated . Also i own the property the business is on and should i sell freehold or lease the property to make the sale more attractive to purchasers

1) Okay so you're making 118k OP - but does that include your salary?

2) Also, is the company paying rent at a commercial rate, or is it artificially high or low?

If the answer's yes to both question, then you will need replacing at, say, 50k - so the 'real' profit (as far as a buyer is concerned) is about 70k. A buyer for a small company will be looking for (circa) 25-30% ROI, so that would value the company at about 200-250k.

Now at the moment, your 118k is actually worth, after Corp Tax, Income Tax, NI, Emp NI, Div Tax, probably about 60k in your back pocket. If you sell the company for, say, 250k because you've owned the company for more than 2 years (5 years, in fact) you'll get 75% Tax Relief on the Capital Gain (75% of 40 = 30) so you'd only pay 10% Tax, netting (cira) 225k after Tax - which is about 4 years worth running the company (after Tax).

One option might be to sell the company for £250k, thereby pocketing £225k, and rent the building out to the new owner. I don't know what the property's worth, but if it's worth, say, £200k then you could expect to get a rent of about £15k pa.

As they say, it's your decision.