I just want to add as well...
I thought that there was a sort of "rule" about the time period in which the buyer sees a full return of his or her purchase. In other words, let`s say that X business makes $100 a month. If I sell it for $1000, the buyer will see a full return in 10 months.
Is there a general rule for this--rate of return and purchase price? Just wondering.
Valuating a company can be a bit tricky. From what I have heard for small businesses is that often the revenue is used as a basis for coming up with a sale price. The idea is that other businesses often figure that with their "superior" management style, they can trim the expenses a lot more, so they are often more concerned with revenues than profits (Dan Kennedy describes this concept in his book, "How to Make Millions with your Ideas").
One way you can come up with a sales price is use your revenue and divide it by your annual return %.
Let me walk you through one possible way you can do this, since this can be confusing for some:
-Determine what your total profit has been over the past two years you have been in business
-Now subtract the amount you initially invested in the business from the the two-year profit
-Divide this number by the amount you initially invested into the business
-This will give you your return over the past two years. Divide this number by two to determine what your average return per year was.
-Now take your most recent annual revenue and divide it by this average annual return.
-The resulting number is a selling price that you can start at.
Again, valuation is tricky and this is a very quick way of valuating your business. Your business may sell for less, since the most probable selling price wont always be the same as what your business is worth. This will at least give you a ballpark figure on where you can start from. If you can find out the average value of other clothing companies of your size, that can help you to refine this number further.
If I confused you at all, I apologize. Feel free to PM me if you need clarification on the steps above.
Hahaha. Got it. Had to do it twice though. I was gonna sell my business for $1 the first time around. Yeah.
So, now I have a number; it was actually close to what I thought. Considering this is a turn-key operation, I will up the price somewhat. The process you showed above...Does it have a name?
Your link is defective. I believe you are missing the letter "t". :) Have you tried to list your business with craigslist.com? Perhaps you many want to try women`s websites, ie: work at home sites and mom sites. They usually have a place where you can do some advertising, right? Just an idea.
Best of luck.
do you know what other similar businesses are selling for ? buyers will be concerned mainly with the true earnings (EBITDA) before taxes, depreciation/amortization. maintaining good records is key. you also have to provide tax returns and make sure those sink up with the internal financial statements of the business. as far as price, researching the multiple in your industry is the best option. online businesses are usually lucrative in that they command slightly higher multiples. i.e. if your business has an EBITDA of 100,000 and you ask for $325,000 for your business, you are selling it at an earnings multiple of 3.25.
Thanks for your response. My clothing line supplies breastfeeding wear for moms nursing their baby(ies). It isn`t too easy to find stats on comparable businesses. My proof of earnings can be shown via Paypal statements, eBay feedback, etc. I would be selling the brand name, the site (and domain name) and, finally, the manufacturing contact.
So, my best bet is to take my yearly earnings and multiply them by 3.25? This is basically a turnkey operation. I will even provide initial stock for start up. The buyer just needs to invest in repeat orders from Asia to continue where I left off.
Thanks for your thoughts.
I am new to StartupNation. So, if this topic has already been discussed, I apologize in advance for the redundancy.
I have a home-based business that I started 2 years ago. I import a small (4-7 items) clothing line from Asia. The line carries my label. I sell both via my site and ebay.
I would like to sell the whole thing--from A to Z as I am now going to be returning to work. I created this business as I am a mother to 3 young children. However, they are now going to be starting school in Sept. 2009 and I, myself, will be returning to my place of employment. Not only does this business run smoothly, but there is room for growth and expansion.
I know how and where I can offer my business up for sale. My main problem is setting the price and backing it up when a potential buyer asks for my thoughts behind such a value. I have looked on the net for some potential strategies, but they are more complicated than I would think necessary as they usually pertain to big companies.
So, I came here.
If anyone can offer some assistance on how to price my small business, I would be grateful. As well, if any one has some words of advice or "Take Caution!" thoughts, please do share.
Thank you!Thyme2/4/2009 9:04 AM