Valuing a small taxi/private hire business

[Hunti410]

This is my first post on this website so please be gentle everyone.

Currently I am looking at a Stansted Airport private hire taxi/chauffeur company but i am not entirely sure how much the business is worth. The business has about 15 self-employed drivers and all its income is through 20% commission based on the earning of the drivers. The business is doing about £140k a year gross turnover and it generates a adjusted net profit of approx £20k per year to the current owner who says they do no driving but a new owner more hands on could earn much more.

The business is run from home but does benefit from a bespoke online web booking and dispatch system for the drivers. The system is highly automated and owner says that this is worth at least £15k.

Any help would be great and if you have question please let me know.

The owner is unclear about value as the goodwill factor is difficult to assess - good system, account work is 46% cash is 54%. Websites in place etc.


Thank you in advance.

John

 

[billmccallum1957]

take a look at what other people are asking for taxi businesses... http://uk.businessesforsale.com/uk/....From=&Profit.To=&Turnover.From=&Turnover.To=

 

[Clinton]

Currently I am looking at a Stansted Airport private hire taxi/chauffeur company but i am not entirely sure how much the business is worth.

Nobody can help you there.

Small business owners - and buyers of small businesses - struggle to understand one simple truth: there is no one exact number that can be attributed to the value of a business. It's a personal thing. It's worth whatever you feel it's worth.

And if you're still looking for someone else to give you a number ... you are not ready to own a business!

One buyer may think that the so called goodwill here is worth £40K. Personally, I would pay circa £20K (but that's only if everything the owner says stacks up when I check it out).

 

[Mr D]

If the owner does not take a salary then that profit is probably their income. How much do you want to pay to buy a job?

 

[The Byre]

The very rough rule of thumb, is four times gross profit. For a small business, this calculation does not stand up however, as the owners are not just owners, but also have to work in the business, but nearly always class whatever they take out of the business as gross profit and not wages. It may be down in the books as profit of some sort for tax reasons, but they had to work to get that money, so when it comes to a valuation, it is either wholly or partially, wages.

Real assets and liabilities have to be added/subtracted from that figure, so a taxi company with a fleet of 10 cars, each with a Birmingham auction-house value of £5k, generating £30k gross profit, which is all that the owner-manager takes out of the business and that person has to work 40 hrs a week, answering calls, posting calls on the website and doing the books, is really worth £50k for the ten cars. The rest is a job!

Please forget any guff spoken by those selling their businesses about 'potential for growth'. There is also the potential for the opposite - right down to abject failure!

So the bottom line is, if the owner has also to perform the day-to-day management of a business, then his wage (let's say for the sake of argument £30,000 p.a.) comes off any gross profit figure, to give you a new figure. And it is that new figure that must act as the basis for any calculation.

As for £15k value on a bookings system - hmm. That sounds rather optimistic to me, considering that there are nowadays 'WordPress' plugins that can cover all or part of those functions.

 

[RBS]

The system is highly automated and owner says that this is worth at least £15k.

Not true. There are so many systems around costing just few hundred or up to 3 quid per driver per week.

I`m in a process of researching such systems currently.

 

[Clinton]

Good point, @RBS

It never bodes well when a buyer quotes the owner of the business.

"The owner says..."
"The seller claims that...."

Ridiculous.

Sellers will give you any old cobblers. Tell us instead what you have discovered. What research have you done into the business? What have you found?

But I guess we'll never hear. Like so many first time posters, this one seems to be one of those rude gits who posts for opinions and advice and doesn't bother to return even to say thanks.

 

[Bob Dunn]

I used to supply Taxi companies with 2 way radio equipment and I have seen quite a few change hands over the years. In London there was an old maxim that the firm could be valued at a grand a driver and an extra calculation made for the profitability for any account work. With what I know the dangers in buying such a business are : Drivers are self employed and can simply walk without notice, they dislike change and could start with a competitor tomorrow. Same with any contracts where an account usually has no formal contractual ties to the taxi company and can just decide to use another firm. With recent rulings against Deliveroo and ongoing actions against Addison Lee you may find yourself caught up in suddenly having to become an employer with liabilities for wages, PAYE, Sick pay pension schemes & holidays. Next, many small taxi companies are slowly declining because of emerging technology like Uber. What you buy today may not be around next year. Tread carefully but your prospective purchase is in a difficult industry where my personal opinion is that the heyday has gone.

 

[RBS]

"ongoing actions against Addison Lee" - any more details about this?

 

[Bob Dunn]

Seems UKBF dont deem me trustworthy enough to post a link but the actions against AL and others are well documented on Google.

 

[RBS]

You can PM me the link. Thanks.

All I know about AL is that they tried to take government to court because they wanted to use bus lanes. And they lost.

 

[Mordensurreytaxi]

Well, you are right given value is important factor