Forums: Discussions for entrepreneurs and small business.

Hello all,

So my first post involves a local coffee shop that has been posted for sale.I have come across a business for sale and was wondering on how or if there is any way to value the business other than what the owners "accountant" has valued it at.

You could hire an independent auditor to go through the books and evaluate the business.

IMO, there are 2 "values" in this case ... the value of the business as it currently is, which you can determine with the independent auditor. And then there`s the value of the business to you, which is the income capacity it has if you were to come in and take it to the next level. Obviously the first one would be your purchase price, and the second one would be your projections for the business once purchased - which you would use to determine if this investment is worth it to you, in the long run.

i`d ask for tax returns and hard evidence of past sales and expenses

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James Lindon, Ph.D. Patent Attorney
Lindon & Lindon, LLC
Cleveland, Ohio
Patents, Trademarks, Copyrights, Pharmacy Law, Litigation
[this is not legal advice - provided for discussion only]
Intellectual Property for the Individual and Small Business: Identify, Protect, Enforce, Defend.
"Fools rush in where angels fear to tread."
http://www.LindonLaw.com

Hire your own accountant. :-) 

There is current value and future value. In order to capture the maximum value you should have a study of the company done, its industry and the markets it operates in. Both internal and external factors that influence value of the company. Internal factors include, among other things, the company’s financial position, results of operations and the size and marketability of the interest being valued. External factors include,  the status of the industry and the position of the company relative to the industry. To enable a formal valuation opinion, you should have an expert analyze financial statements, financial information and other data obtained from management. Have them visit the company, interview management, research the company’s industry, customers and competitors, search for guideline companies and perform other procedures necessary and appropriate to render an opinion regarding the value of the company in accordance with the appropriate standard of value. Look into your local phone book for a business advisor or business broker. You are looking at a few thousand dollars, well spent.

 

Erin

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Our Goal Is Your Success!
Founder Girls with Goals

Also, some times they are already working with a brokerage who have already done this work and can show you this information. This would save you some money, or you can suggest if they don`t have it, for them to get a business valuation by a certified cba.

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Our Goal Is Your Success!
Founder Girls with Goals

Thanks for all the replies

I`ve never understood how accountants evaluate good will. I know it`s a true asset, but have no clue what measures are involved. 

edited

This thread has nice information...

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How to Start a Coffee Shop Business

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