The Entrepreneur Forum | Financial Freedom | Starting a Business | Motivation | Money | Success

Welcome to the only entrepreneur forum dedicated to building life-changing wealth.

Build a Fastlane business. Earn real financial freedom. Join free.

Join over 80,000 entrepreneurs who have rejected the paradigm of mediocrity and said "NO!" to underpaid jobs, ascetic frugality, and suffocating savings rituals— learn how to build a Fastlane business that pays both freedom and lifestyle affluence.

Free registration at the forum removes this block.

What's Value of Companies Under $100K Net

CareCPA

Platinum Contributor
FASTLANE INSIDER
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
356%
May 2, 2017
976
3,479
35
Pennsylvania
Is there an exception to MJ DeMarco's method of valuation of a business asset for very small companies like mine that have revenues under 100K? Our main competitor/counterpart in another city (they appeared on shark tank) said that someone could start up a business and do what we do, and that our income is tied too much to us as people, rather than our business system, so we could not sell based on our assets + net income times our industry multiplier. Thoughts?
If it's truly built on your reputation as the owners, then it's worth very little.
I can go buy a tax practice, but if the clients really liked the person that's selling, there's zero guarantee they will stay with me. That's why it's common to see an earnout based on client retention.
 

MidwestLandlord

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Speedway Pass
User Power
Value/Post Ratio
759%
Dec 6, 2016
1,479
11,226
Is there an exception to MJ DeMarco's method of valuation of a business asset for very small companies like mine that have revenues under 100K? Our main competitor/counterpart in another city (they appeared on shark tank) said that someone could start up a business and do what we do, and that our income is tied too much to us as people, rather than our business system, so we could not sell based on our assets + net income times our industry multiplier. Thoughts?

Just think of it from the buyer's point of view.

They are buying a business because they want an income producing asset.

They are paying for the current net income and the assets that produce it.

So if it's the owners themselves that are the income producing asset, because the clients rely on the owner and not the business, then the business entity itself is worth very little or nothing.

Take CPA's for example...

A CPA "one man show" that does all the work mostly himself has a business that is really not sell-able. He IS the asset that produces income.

A CPA that has multiple bookkeepers and such MIGHT have a sell-able business, to another CPA. But there is big risk to the buyer that the clients will not stay with the firm under new ownership.

A firm that has multiple CPA's, multiple bookkeepers, etc, where the business handles the clients has a sell-able business because it's likely that the clients will stay regardless of who own's it. (assuming they operate it the same way)

That's why building a business where you eventually can work "ON" the business instead of "IN" the business is so important. If the business model will never allow that, then you will likely never meet the fastlane equation of net income + asset value for a sell-out.
 

SethChild

Contributor
Read Fastlane!
User Power
Value/Post Ratio
103%
Sep 27, 2018
36
37
St. Louis, Missouri
Check out bizbuysell.com for offline businesses. Empire Flippers for online businesses. Find a comparable and study the multiples.
Thanks. This is completely foreign territory for me.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

SethChild

Contributor
Read Fastlane!
User Power
Value/Post Ratio
103%
Sep 27, 2018
36
37
St. Louis, Missouri
Is there an exception to MJ DeMarco's method of valuation of a business asset for very small companies like mine that have revenues under 100K? Our main competitor/counterpart in another city (they appeared on shark tank) said that someone could start up a business and do what we do, and that our income is tied too much to us as people, rather than our business system, so we could not sell based on our assets + net income times our industry multiplier. Thoughts?
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

SethChild

Contributor
Read Fastlane!
User Power
Value/Post Ratio
103%
Sep 27, 2018
36
37
St. Louis, Missouri
Thank you. Good reality check. I was getting excited thinking that because we'll hit the 40K net income threshold this year from this business that it is sellable. But I realize that I would/will need to put some automated systems in place before it has much value.
 

Post New Topic

Please SEARCH before posting.
Please select the BEST category.

Post new topic

Guest post submissions offered HERE.

Latest Posts

New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Ideas needing execution, more!

Join Fastlane Insiders.

Top