posted
Is there a formula for what a sign shop is worth? I am looking at a business in another state. 28' bucket truck, some tools and stock, cut files, website, customer base, phone number, ad in the phone book. Well established shop for 11 years, Quality work. Commercial, electrical signs and service, sandblasted.
My computer, plotter, scanner, printer and wood working tools.
This may be a good opportunity for me and the price seems right.
Cheers
-------------------- Rob Thomas 3410 Ketcham Ct Beautiful Springs FL 34134 Posts: 965 | From: Bonita Springs, Florida USA | Registered: Feb 2000
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Hiya Rob, A business is supposedly worth 2-5 times it's annual gross sales plus inventory. At my last position, the previous owners sold their place for about 2.5 times their annual gross. This included all the inventory, tools, box truck, etc. The building was a lease so that wasn't factored into the bottom line. They also held a note for about 20% of the sale price, gave 1 month of on site support and 1 year of telephone support as part of the deal to the new owner, who had no previous sign experience. Other things you need to consider is a non-compete clause, good will, and how much of the business is repeating. I would also be concerned about the quality of work the current owner is producing and will you be liable for something he may have done poorly. 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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Rob, there is another school of thought that says that small businesses have little "goodwill" and are worth only the net asset value of the tools, materials, and equipment. Goodwill is the dollar difference between net asset value and purchase price.
Another rule of thumb used to be five to ten times net earnings. You don't want to accept pro-forma income statements as proof of earnings, you want to see what the seller is telling the IRS - three years of business returns.
Certainly goodwill does have value. It takes three to five years to get well established starting from scratch.
Probably the best way to gauge value of a business is to think of it as a new shop tool. If you buy it, can you crank enough signs to recover the investment and put a fair return in your pocket? That's where your business plan comes in.
Another cold and calculating way of analyzing it - if SBA won't finance it, the plan and the numbers are not right.
This is a really fuzzy answer. Sorry I don't know how to be more specific. Vic G
-------------------- Victor Georgiou Danville, CA , USA Posts: 1746 | From: Danville, CA , USA | Registered: Dec 1998
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One shop owner wanted to sell me an old 386 computer, Arts and Letters software, a worn out 15'' Roland plotter, and his "clientele" NO BUILDING OR TOOLS for 65 G's.
If I were selling mine, I think the total value of our woodworking tools, computer and office equipment, software and building would be fair. I can't see a small business buying or selling "clientele". $65 grand just happens to be about what I have invested in mine.
-------------------- Wayne Webb Webb Signworks Chipley, FL 850.638.9329 wayne@webbsignworks.com Posts: 7407 | From: Chipley,Florida,United States | Registered: Oct 1999
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I'd make sure you aren't buying yourself a headache before you make any moves.
Tools, equipment, established rank in the community are all well and good but how's their accounting? Are they upside down on all their loans? Are their books detailed or do they just throw all receipts into a shoebox?
I also don't see how anyone can sell a client list. The customers can go anywhere they please and they will, especially if they don't like you as much as they liked the previous owner.
-------------------- "If I share all my wisdom I won't have any left for myself."
Mike Pipes stickerpimp.com Lake Havasu, AZ mike@stickerpimp.com Posts: 8746 | From: Lake Havasu, AZ USA | Registered: Jun 2000
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It seems at this point she is selling for about $10,000 to $15,000 above tools, stock and the bucket truck.
Total price is less than half of her yearly sales. I think I could increase sales alot because she hasn't been actively selling because of her health problems.
Cheers
-------------------- Rob Thomas 3410 Ketcham Ct Beautiful Springs FL 34134 Posts: 965 | From: Bonita Springs, Florida USA | Registered: Feb 2000
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$10K to 15K above equip. & inventory is about what I paid for my business which was a little under half it's gross sales at that time. The former owner was kind of burned out so I also felt I could force that sales figure up which I did.
Mike's right about the fact that the old owner's loyal customers could easily go elsewhere, but I think that if the shop has repeat customers & well organized files to produce & price there work from, then anyone with good people skills will have an advantage in needing only to KEEP customers, instead of a start-up shop needing to GET them.
I would want to factor in what you have going already, did you really want to move to that place anyway, & are you already or did you want to evolve to doing electrical work in bucket trucks?
posted
When I left NY ten years ago I wasnt selling my business but I did sell my phone number. My only competitor bought the number from me for $5k and then a former customer of mine decided he wanted to take over when I left.
He didnt know the first thing about the business so I agreed to sell him the stuff in my brain for $10,000. He agreed. I told him what equipment, supplies and everything else he would need then taught him how to become a signmaker over the telephone and fax machine from Florida 1,200 miles away. He is still happily in the business today and became very good at it.
[ August 28, 2002, 01:29 PM: Message edited by: Bob Stephens ]
-------------------- Bob Stephens Skywatch Signs Zephyrhills, FL
posted
Doug, I think you know where I am coming from. The move would be to a resort area out west in the canyons and mountains. It's kind of a small town, so it would be hard to start a business without knowing anybody in a new area. I've been thinking about moving to this area for a long time.
I used to live there but haven't for about 25 years. I am sick of Florida for many reasons.
I want cool mountain air, snow and an awesome veiw!
The bucket truck is just a bonus because there is no one else the area that does electrical signs & service.
I would have the only bucket truck in the valley! If it goes well I would hire someone to run it, so I can be at the shop & selling.
Cheers
-------------------- Rob Thomas 3410 Ketcham Ct Beautiful Springs FL 34134 Posts: 965 | From: Bonita Springs, Florida USA | Registered: Feb 2000
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Hi Rob, We run a 2.5 person mom & pop shop in Jersey, about 15 miles from NYC. The shop was started by my wifes dad in 1946. Our kids went of college, are successful but are not interested in going into the sign business. We have many accounts, repeat work and do not have to advertise. Retirements a couple years away. Franchises go for $65,000 or so with no customers. The individual buying our shop would be busy from minute 1 making money with no gaps. This has to be worth something. We are also wondering what our well established shop is worth. I guess it is whatever someone is willing to pay. Dan
-------------------- Dan Cahayla City Signs, Inc. 46 Passaic St. Garfield, NJ Posts: 1 | From: Wanaque, NJ | Registered: Nov 2001
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$15K plus the depreciated value of equipment and inventory sounds like a fair deal.
I think Mike Pipes is wrong about buying the clientele -- they'll call you FIRST. if you can't make that sale, then yes, they will go elsewhere. (just like your current clients where you are now).
you're buying "momentum" -- and if the business has it, and if you have the skills to (at least) maintain it, then it sounds like a good deal.
-------------------- :: Scooter Marriner :: :: Coyote Signs :: :: Oakland, CA :: :: still a beginner :: :: Posts: 1356 | From: Oakland (and San Francisco) | Registered: Mar 2001
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I have operated a "traditional" ma and pa vinyl shop since '89. We sold our original strip mall sign biz for around $65K in '92..we were only grossing around $80K at the time. We sold it for less than what we wanted because we were motivated because of a conflict with another business enterprise at the time and because we sold it to another sign company looking to expand. Our present sign biz has grown to annual sales of over $250K, if I were listing it today, I would place substantial value on historical sales/blue sky or goodwill. My point is...another sign company may not be the best barometer of selling/purchansing pricing. This notion of selling for $10K to $15K over the worth of depreciated physical assets is likely appropriate in only rare situations. This is a classic example of the polarized mindsets of many letterhead participants and the franchised shop proponents. They might lack imagination...but I can almost guarantee that a financially successful(and documented) franchise shop will demand (and get) more than $15K over depreciated assets. Likewise, (call me if I'm wrong heh heh) you would never expect to buy a biz like Glenn Taylor's for a song and a dance.
-------------------- Tony Lucero Eagle Graphics Waterford, MI www.eaglegph.com Posts: 305 | From: Waterford, MI, USA | Registered: Apr 2000
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I for one would never buy someone elses buisness!
Here's the reasons why...
1. You never really know what someones reputation is until your in their shoes and thats a heck of a time to find out.
2. "Blue Sky" is all you are really buying...you can get all the used tools you want at any hock shop.
3. If you really know what you are doing... borrow the amount you are willing to invest in someone elses buissness and invest it in yourself.
4. People are always looking for another sign source...opening your own "new" shop will be succesful if you work hard at it...ther is no guarantee the sellers customers will stay with you anyway.
5. If the seller wants out and can't sell his shop... that leaves a hole in that market...fill it with your own shop.If he does sell it to someone other than you...let the new owner suffer the pitfalls of the purchase while your picking up his slack.
6. Never buy a buisness thats in a lease or rented building...if they have no real estate to back up the purchase you could loose everything over a lease dispute.
So I guess you can say "In my opinion" Someone elses shop isn't worth much...but your "new" shop is worth every cent you invest in yourself.
"Werked fer me...it'll werk fer you"
-------------------- "Werks fer me...it'll werk fer you"
posted
Monte, I have to say, I don't agree with your assesment of buying a business having done it myself.
1. If you look at the sales history & it includes some repeat business, that say something about their reputation. They most likely have a portfolio they show clients on a regular basis & you could see not only that, but go and see work done 3, 5 even 10 years ago if that exists. This too, along with meeting the person & seeing the shop should tell you a lot. Obviously not everything though. I learned about some bad habits of my former employer after I bought his business & built it stronger then it ever had been. I learned that he procrastinated on jobs, & often didn't return calls. That fact made the business had even more potential then the books implied.
2. The whole is greater then the sum of it's tools. Another way of looking at it is that a hock shop sells used stuff just like the business opportunities listing in the classifieds. A used business is a tool. A very specialized tool.
3. If I paddle into a wave that's already breaking, I'll stand right up & start carving my own line. It's true that someone could invest more energy paddeling out further into greater risk. They may come up with a better ride, or with nothing. Buying a business in no less an investment in ones self, & re-inventing that business around ones self results in a business that is no less ones own business.
4. no dispute on this point.
5.
quote: If he does sell it to someone other than you...let the new owner suffer the pitfalls of the purchase while your picking up his slack
I believe the greater likelyhood is that you will suffer the pitfalls of trying to establish a new enterprise while "someone other than you" is picking up your slack.
6. I moved my business after purchasing it. Another sign kept that spot, but I got better space at a better price, & comparable location. Location is important but it's not everything. You can't lose what you don't have, but a business without a building is going to be affordable for some, where buying a building may not be. Besides a new mall may turn a town around & your building may end up in the wrong end of town.
Anyway Monte " my opinion" is so different I figured I'd add it to the mix, but I respect your insights as equally valid. I hope some day to build myself a shop like you have done. Best of luck to you with that Monte, & to Robert, whatever he decides to do.
posted
Your right Doug ...everyone sees it differently.
And as I look a little closer to the subject here I will have to admit that were I to succomb to buying out a buisness it would never be a franchise.
All in all Robert should be comfortable with what ever he does and asking for input is the only smart approach.
Still I feel pretty adamant about everything I said here...I suppose because it is the way I have done it.Interestingly enough tho...I can't imagine selling my buisness to anyone...I can't even imagine anyone being interested enough to purchase it...especially if they think the way I do.
I can however see the importance of owning the property the shop is in...now there is a viable source of undisputed income and potential retirement income.
[ September 02, 2002, 08:33 PM: Message edited by: Monte Jumper ]
-------------------- "Werks fer me...it'll werk fer you"
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