Looking for help with business value

[mlwhite79]

Hey guys! I'm looking forward to posting on these forums. Does anybody have experience or preference with a business valuation tool that can help an (potential) investor value a company?

 

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[cautiouscapy]

Hi

Not a tool as such, but can be sort of distilled into one -

Have a look at MJ's really helpful answer to me asking the same sort of question on this thread (I wanted to link just to MJ's post but can't see how to. My own thoughts posted won't add much for you ;-)

https://www.thefastlaneforum.com/co...assess-a-business-for-sale.47452/#post-293595

 

[mlwhite79]

For some reason, that link doesn't load for me. Apparently I don't have permission to view it.

Anybody familiar with a website online that may be able to help me get a ballpark estimate?

 

[cautiouscapy]

Ah - my original thread was on the INSIDERS Forum - I am sorry!

Here's a cut and post - may or may not be relevant to what you are looking at - copyright MJ De Marco:

" As for valuations of an internet business, it depends. If this is a inventory / commerce based website, these are the metrics I would use:

1) Net profit by year. (2-4X this amount is not uncommon for valuation)

Example: $60K gross profit per year, plus $30K owner salary would be a valuation in the $180K-$360K range.

2) Revenues, Gross (1X is not uncommon, but inventory based might be lower as a reflection of a lower margin.)

Example: Gross revenues are $400,000 -- valuation $400,000. (Margin is the big metric here.)

3) Customer Base (Total)

How many customers does the site have? List size? 500? or 50,000? (A 50,000 list of buyers is valuable.)

4) Customer Base (Repeat)

What % are reordering? Is there brand loyalty? This is where a price can implode. If no one is reordering and your $$ is dependent on advertising, you're not building an asset, you're just buying your way to a business via advertising just to keeping it afloat. Think, will business grow if I stop advertising?

5) Inventory (As an asset, it would add to the acquisition cost of the business.)


6) Traffic, and Source. (Is it SEO stuff? Advertising? Repeat buyers?) This will help you determine the RISK involved. For example, if 93% of your sales come from a great SEO ranking, and the reorder rate is 2%, the valuation will be much lower and the risk, IMO, huge. A Google algo change could kill your business. These are the type of things you need to determine.

On the flip side, if there is a little advertising going on because buyers are loyal and repeat, the value skyrockets. You are not dependent on anyone but the worthiness of the product.

Hope this helps."

 

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[mlwhite79]

Good information, thanks. I am really looking for something online that can give me a ballpark estimate, though. Does anybody know of a website that can help me predict what a business is worth?

 

[SanMateo]

Good information, thanks. I am really looking for something online that can give me a ballpark estimate, though. Does anybody know of a website that can help me predict what a business is worth?

Websites don't do this. You need to contact a CPA, a lawyer or business broker (for example) to value this business. This is a very complicated process and takes a great amount of due diligence. I have experience in this realm - I used to do the financing for mergers & acquisitions with small-to-mid sized businesses. Get an expert. A true valuation is the hardest thing to do and can only be done with full reporting and due diligence. Also, your multiplier varies depending on industry and some valuations go off of EBIT, EBITDA, gross profit, etc. It all depends on the industry, the company, and the market.

 

[mlwhite79]

Thanks, I am sure brokers and CPA's are great at what they do. I don't need a professional at this stage. Does anyone have experience with a website that has comps - sort of like an MLS for business?

 

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[Mrs. BRKb]

...sort of like an MLS for business?

This site lists businesses for sale:

http://bizmls.com/home.asp


You need to find the multiplier for the type of business you are investigating:

http://www.orioncg.com/multiplier.php

 

[TheValueGuy]

It sounds like you are looking for something that can give you ballpark estimate for similar businesses in your area?

There are a few sites to consider, like Valusource for small business at http://valusource.com/Products/BusinessStakeholders.aspx

Their service isn’t necessarily a legally binding valuation but it may be what you are looking for. A lot of the pros use their higher end stuff, but this is affordable and should work.

 

[mlwhite79]

Thanks for the response. Does anybody have experience with this kind of service?

 

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