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Our sign competitor is trying to sell and retire. I would like to see what your opinions are about how to value there business. No real estate however it is an option. I can't talk specific numbers because we have met with them and promised not to disclose. Two full time owners, full time employee and couple part timers as needed to give you an idea of ther size. there salaries I am guessing are low because they have retirements from state jobs while working the business.Almost half there sales are embroidery for which we are seriously considering getting into. No contracted work. Net profit margins of 20-30%. Some of the equipment: Versacamm 30" 24" cutter (old) 4 Head Embroidery machine 1 Head Embroidery machine Late 70's early 80's bucket truck 6 station screen printer 4 station (very rough condition) OK inventory of 15" vinyls and Printable vinyls
Equipment is easy to figure, I guess I am asking is worth buying blue sky to establish a new market, to get instant access to customers?
-------------------- Mike South ABC Glass & Signs, Inc. 1415 Main Street Miles City, MT 59301
abc@midrivers.com 406-234-1234 Posts: 167 | From: Miles City, MT | Registered: Mar 2004
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Having gone down this road only to get waylaid by a greedy seller who just couldn't keep word or his stories straight, let me offer some advice.
Get EVERYTHING in writing. Make requests for documents in writing. Make every offer in writing. Document conversations and all dealings connected with the business.
Get their books, their business tax returns, and the P+L sheets. Make sure the figures all jive with each other. I won't disclose the specifics of the shenanigans I discovered but let me say it was an eyeopener at how other people run their business.
Make sure that ALL the equipment is owned free and clear BEFORE you exchange any monies. My seller had every major piece of equipment leveraged. It wasn't their's to sell legally. This is very important.
If you get to the table and they hold out once again for a couple of extra bucks, just walk away. My seller agreed to a price three times and then, when it came time for the deal signing, held out for more. They figured if I was able to pay XXX then I would be willing to pay YYY. Wrong.
As far as figuring out a business' worth? I have heard of using gross sales, net profits, goodwill, and the such. I don't think that there is any "rule of thumb" secret formula.
It basically boils down to this...
What are they asking and are you willing to pay it?
-------------------- Bruce Bowers
DrCAS Custom Lettering and Design Saint Cloud, Minnesota
"Things work out best for the people who make the best of the way things work out." - Art Linkletter Posts: 6451 | From: Saint Cloud, Minnesota | Registered: Jun 1999
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After going through it one time We settled on a handshake. I bought the screens and paints and the equipment that I wanted, and took all the patterns with the agreement that when one of his customers called me and I used one of his patterns, 10% went his way. This worked for both of us, but not much money was ever generated. I got the customers anyway, and found they wanted to update their images with my designs. If I had it do do again, I'd want to buy their customer list and consider that the only thing of value they have.
-------------------- The SignShop Mendocino, California
Making the simple complicated is commonplace; making the complicated simple, awesomely simple, that's creativity. — Charles Mingus Posts: 6714 | From: Mendocino, CA. USA | Registered: Nov 1998
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Hiya Mike, There really are no set rules to value a business. However, there are several recommended guidelines to follow. I would post what they are but I can't find my notes. Anyway, in addition to above, get you CPA to audit their books. Once he's done, you should be able to extablish a fair value. Also, don't hesitate to call some of the existing clients to see what their opinion of the business is and how much, if anything, they plan to purchase in the future. Finally, if you're allowed, talk to the employees to see what their intentions are should be business be sold. In one shop I worked for, the lead designer quit the day of the sale and there was no back-up.
Havin' fun,
Checkers
-------------------- a.k.a. Brian Born www.CheckersCustom.com Harrisburg, Pa Work Smart, Play Hard Posts: 3775 | From: Harrisburg, Pa. U.S.A. | Registered: Nov 1998
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That's kind of our attitude right now Doug. Are we willing to lose it to someone else. They were not strong designers. If someone comes in that is a good designer with experience, we could take a hit on our sign sales.
I think we would be in a situation like Rick said about updating designs. The digitized embroidery files for customers are perhaps the mose valuable product that they have.
We are in a small town(9000population) getting there customers is not hard. We are guessing offering the same service we can take a big % of the business.
Thanks Bruce, I did get into this busineess by buying another sign shop. We had contracts drawn up by lawyers and it protected both the seller and buyer. They only way to go.
-------------------- Mike South ABC Glass & Signs, Inc. 1415 Main Street Miles City, MT 59301
abc@midrivers.com 406-234-1234 Posts: 167 | From: Miles City, MT | Registered: Mar 2004
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If they close you can spend a few bucks mailing out marketing to all the local bizz's. You will get his clients anyway.
If he gets a buyer no matter if the new guy has a designer or not,,, and you market to the local bizz's you will get the clients anyway.
I just did this in another bizz and the other guy right down the street closed up anyway. I got all my own new clients and none of his were mot worth anything to me because his prices were too low.
The next consideration is... if his clients are under some type of contract then this is a client list. Is valuable. If he has just a list of recent customers buying from him then this is nothing more than a customer list and is almost worthless. Recent buyers already have what they need. And they will look around anyway.
Look above at ricks post and see what I mean as an example. Buy the equipment you can use yourself and concentrate on building your bizz the good old way with solid marketing and never again worry about they other guys.
-------------------- Leaper of Tall buildings.. If you find my posts divisive or otherwise snarky please ignore them. If you do not know how then PM me about it and I will demonstrate. Posts: 5274 | From: Im a nowhere man | Registered: Jul 2001
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It sounds like it's being run as a "hobby" business in that they don't need the income. If that's the case, they may be just a low price operation. Do the net profits of 20% to 30% reflect their income or lack of taking an income? Buying hard assets that you can make generate income is the only way to go in such a small market.
-------------------- Bob Moroney The Sign Guy 310 Club Valley Drive Falmouth, MA 02536 508-259-6297 Posts: 216 | From: Falmouth, MA | Registered: Jul 2008
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Bob, I think is somewhat of a hobby business. I don't think much income is being drawn. At least not two owners drawing good incomes. More like one owner drawing an OK income as needed.
I think your completely correct, and the profit margin reflects. We will probally make a very low offer based off of hard assets. Take it or leave it deal. If they leave then it's fine. We would rather buy new equipment anyway, just market to generate new customers.
-------------------- Mike South ABC Glass & Signs, Inc. 1415 Main Street Miles City, MT 59301
abc@midrivers.com 406-234-1234 Posts: 167 | From: Miles City, MT | Registered: Mar 2004
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I would never buy "pie in the sky"- in my opinion, the only thing that is worth anything is the equipment, which you can find just about anywhere. Most customer lists are worthless because most customers are unpredictable, and the few that are loyal might not be with you as the new owner.
Offer to buy his equipment, then maybe offer work to the employees that can operate it- just run the business the way you do your other one, not try to keep his operation running the way he did. Hope that makes sense.
-------------------- Michael Clanton Clanton Graphics/ Blackberry 19 Studio 1933 Blackberry Conway AR 72034 501-505-6794 clantongraphics@yahoo.com Posts: 1736 | From: Conway Arkansas | Registered: Oct 2001
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The company name and goodwill it has generated over the years can be worth something. Figuring out if it is & what that amount is is tricky.
If they've been the shop known for quality, good service & they use correct pricing, then buying their name is worth a lot more than buying a name that hasn't practiced that. In essence, you'd be buying their reputation. But that only has value if you'd be using their name.
If you have an existing business that you'd looking to expand, then what you'd probably want is just their equipment, customer records and files. The customer artwork files were already paid for by their customers. For a fair one-take-all price on the equipment, they should throw in the customer records (what colors/materials used) and prices or at least make a very good deal for those because you may or may not ever use them again and you're saving them a lot of time & money over them selling everything seperately. You wouldn't need their tax returns, etc for this as you'd just be buying assets.
I don't believe customer lists alone are worth the paper they're printed on. Unless they have a contract, there is no guarantee those customers are going to stay with you. Spending the same amount in targeted marketing usually will give you a better return.
Buying the whole kit & caboodle as an established business, leaving it where it is & keeping the name is going to cost more than just purchasing the assets. You'd want your CPA to perform a proctology exam on their records for this, checking assets, liabilities, etc.
-------------------- Chris Welker Wildfire Signs Indiana, Pa Posts: 4254 | From: Indiana, PA | Registered: Mar 2001
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Making the simple complicated is commonplace; making the complicated simple, awesomely simple, that's creativity. — Charles Mingus Posts: 6714 | From: Mendocino, CA. USA | Registered: Nov 1998
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Sure Deb. They've already established confidence in your abilities. You already have info on them. Sending out mailers to your already existing customer base brings in a higher yield with less time spent than targeting new customers. If what you're asking about value is "how much", then I have no idea. I don't think I'd pay a thousand bucks for it, but might consider under $900??? There are so many business consultants that can look at the client list and the gross of the business selling it, that could project an expected return. There is the West Co. and the SBA and other services for the small business that can help. I find mine a treasure!
-------------------- The SignShop Mendocino, California
Making the simple complicated is commonplace; making the complicated simple, awesomely simple, that's creativity. — Charles Mingus Posts: 6714 | From: Mendocino, CA. USA | Registered: Nov 1998
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Having never owned or operated my own business, everything being said here is of interest to me.
The company I work for put an offer in for another sign business a year ago. They withdrew their offer after discovering that the parent company which owned the sign business had told all of its customers that it was closing down.
Any potential goodwill held was lost as the existing customer base began to look elsewhere.
If you can afford equipment and know how to market a new product perhaps only the staff who can operate the machinery you are not familiar with are important.
I'm no expert on business so this is purely me thinking out loud
-------------------- Anne McDonald 17 Karnak Crescent Russley Christchurch 8042 New Zealand
"I used to be indecisive, now I'm not so sure" Posts: 877 | From: Christchurch | Registered: Sep 2006
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I'm hijacking this thread because I want to expand on Rick's comments about a client list.
A moden sign & graphics company should be using some sort of accounting or bookeeping software to keep track of, at least, clients/contacts, income and expenses. With the software, you should also be able to use it to generate reports of profitability and forecasts to predict future business.
So, client lists can be an asset and there is value in them, and potentially a lot of value, if- The business has a lot of repeat clients - If the business you're looking to purchase has a lot of repeat clientelle that spends money on a regular basis, you can, potentially, forecast future income. And, to an extent, banks would be willing to loan money against future business income.
You can also use some accounting or Customer Relationship Management (CRM) software to generate customized lists for direct mail, email and/or other marketing programs.
Even if you're handling your accounting the old fashioned way (with a pencil and calculator), you can still declare your client list as an asset, but it requires a lot more effort to prove it.
Havin' fun,
Checkers
-------------------- a.k.a. Brian Born www.CheckersCustom.com Harrisburg, Pa Work Smart, Play Hard Posts: 3775 | From: Harrisburg, Pa. U.S.A. | Registered: Nov 1998
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I'm thinking I wasn't real clear in my previous post. If you're buying the entire business as a business, then the customer list would be part of that just as the artwork files, etc.
If they're merely trying to sell you a list of their customers with nothing else, it's nothing more than a mailing list like you can get from your chamber of commerce or buy off the internet. I wouldn't put much if any value on that, you'd be just another telemarketer who bought their contact info somewhere.
Rick made a very good point about the phone number, especially if you are taking over their accounts.
-------------------- Chris Welker Wildfire Signs Indiana, Pa Posts: 4254 | From: Indiana, PA | Registered: Mar 2001
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As someone who sold his "business" last year..I think I sold it for less than what I "thought" it was worth, but as much as what it was "actually" worth..and since the buyer bought it I guess he did too.
We spent a couple of days driving around doing introductions.
If everything is open and honest then sellng/buying a business can be productive for both parties.
-------------------- Dave Grundy retired in Chelem,Yucatan,Mexico/Hensall,Ontario,Canada 1-519-262-3651 Canada 011-52-1-999-102-2923 Mexico cell 1-226-785-8957 Canada/Mexico home
quote: you can, potentially, forecast future income. And, to an extent, banks would be willing to loan money against future business income.
I would love to see some direct statistical proof of that... After spending many many hours selling, moving and trying to restart several business.. I have recent first hand experience in these dealings. Walking into a bank asking for money on no more than a promise and a customer list will never get you money. The bank wants to see CONTRACTS for accounts receivable... Banks want the ability to see a PAY BACK.
Lets define some facts. What is a Customer?
In general terms a customer is a person or organization that a bizz owner believes ( speculates will buy something soon. A customer is not necessarily someone who is currently purchasing. The value of a customer is in only when he is passing something of value now. Customers come in several flavors.
Existing Customers,,, who are purchasing now. Former Customers,,, who did purchase. Potential Customers,,, who contacted but did not buy,, yet.
What is a client. Is a buyer who has an ongoing RELATIONSHIP with a seller passing something of value on a continuous basis..
There is some value in a CLIENT list only if those clients are under some sort of agreement or contract to produce future services.
There is no value in a customer list. It is nothing more than a list of persons who could buy at the present time.
As for the phone number.. Just ask the past owner for permission to get that number. Often they will give permission when they call the phone co. to cancel their name from the phone services. Tell the seller to mention that to the phone company and its yours.. FREE!
-------------------- Leaper of Tall buildings.. If you find my posts divisive or otherwise snarky please ignore them. If you do not know how then PM me about it and I will demonstrate. Posts: 5274 | From: Im a nowhere man | Registered: Jul 2001
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Around here the phone company puts a number out of commission for a year, unless a specific transfer (supercedure) is initiated.
Anyone who stands to gain from a number, and then asks for it, should not expect many people to give you something that you value, without asking for something in return. Maybe, but probably not often.
I bought an old signshop's number for $500 once. It paid for itself many times over. It had come from a shop in a nearby area, that had similar equipment, similar accounts & had been well run for many years, before being run into the ground by a new owner in little more than a year. The long history of a positive reputation outweighed the last year of poor service.
posted
Curtis, Since you seem to be "Mr Know it all", you should know that banks don't "share" statistical data on their loan process or how they determine how an established business with a history of repeat clients is worth more than a start-up with no business history. Simply put, an existing business can be worth a lot more than it's liquidation value if the business is properly managed and it's cash-flow is well documented. Banks realize this and are willing to finance some of the costs of acquiring an existing business. Since some franchises have a proven business model and a well documented success rate, you are more likely able to finance the majority of the costs of acquiring a new franchise business versus starting your own independent business with the same or lower start-up costs.
Havin' fun,
Checkers
-------------------- a.k.a. Brian Born www.CheckersCustom.com Harrisburg, Pa Work Smart, Play Hard Posts: 3775 | From: Harrisburg, Pa. U.S.A. | Registered: Nov 1998
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quote: Since you seem to be "Mr Know it all", you should know that banks don't "share
Bull crap.. Thats pure bullcrap. There are REAMs of data around all of it collected collated and assembled into easy to follow data sets. There are dozens of expert consultants with lifetimes of experience in the field of selling and buying and coaching a bizz. All of them just waiting for someone to pump them for info. Just because you cant find one doesn't mean others have not.. All you have to do is look at Doug Allen as just one single example to see the results of getting off the high horse gather a little humility and really grow.
Unlike you,,, I surely am not mr, know it all. But I surely do have recent experience with selling out, moving to a brand new part of the country, and trying to restart business ventures. Unlike you I have ZERO capitol but tons of experience. Unlike you, I spent the past many months researching and consulting with REAL bizz building experts on ways to value a business, to buy and sell, operate, make profitable before opening, to get money and cash flow, how to negotiate a real lease to MY benefit, and a few other details.
I found a couple coaches who know and understand and can envision me making a great living in the services bizz. They also know how to nurture a good candidate such as myself into a paying client so they can make money too.
And finally, I put it all together recently more than doubled my monthly income in just a few weeks with a continued growth projection all in one of the worst economic conditions in the country. Just point out one other person who went from Zero to a livable income in just a few weeks with NO start up capitol, No location, No personal income, No products, No inventory.
So go ahead and say what you want. CAll me "know it all all" you want. I really could not care less. There is no need to try to shoot me down and act like I am some ignorant poster talking out my @ss... I am living this dream based on facts. Not some speculation and personal opinions from some website. And no, my wife is not working either.
Oh yes, it seems one other who posts here got this very same ration from a few others too. Today he is laughing all the way to the bank while those "others" who slighted him are still scratching for some corn.
All you have to do is quit pretending, get up, find a real expert coach and get to work.
-------------------- Leaper of Tall buildings.. If you find my posts divisive or otherwise snarky please ignore them. If you do not know how then PM me about it and I will demonstrate. Posts: 5274 | From: Im a nowhere man | Registered: Jul 2001
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