Business valuation

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ibendwire

Member
I say go for it if it feels right to you. It sounds like you have the right people to help you. You can over analyze these decisions. If it feels right go for it. The one thing I would do is see if the current owner would stay on for a short time to introduce you as the new owner to all his customers. I think that might help in retaining the current customer base. I've always lived by the saying: it's better to try and fail then to never have tried at all.
 
J

joeswitch

Member
I agree with ibendwire. I would also suggest looking at a contract sale not a single lump sum. Pay him $50,000 a year for the next two years. Then if all the goodwill and customers continue to do business, you finish the buyout. If the customer base takes a walk and the transition does not go well after 2 years you agree on a lower total value for the business but do it upfront.

Good luck
 
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POLARISDAN

New member
dont forget whether you are paying cash or financing..cash..no nut..financing ..monthly nut..not a bad idea to do a 2 or 3 stage buyout..since he is retiring, that might appeal to him..remember his 75k income is probably with no monthly nut on building or business..you could wipe quite a bit of that out in interest without increasing sales(as you mentioned)..

also remember the internets impact on the biz in the next 5 years..has this distibution been cannabalized yet? or is is coming...or will you be the one to get it there?


good luck
 
G

G

Guest
Staged buyout good for buyer and seller tax wise. Spread things out. One thing about a certified appraisal - it is recognized by the IRS. Also can be a tax advantage. Also a certified appraisal just about always will favor the buyer.
 
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maximumpsi

Member
If you haven't already, check out the distributor contracts. Many can be cancelled by the mfg with 30 days notice.
People buy from people because of relationships. Are his customers retiring, in which case the new contacts may not be as loyal? Are his customers buying because they like the current owner, or because the products have a significant competitive advantage? An earn-out clause protects you from these risks. Inventory and equipment have a very low value -- to banks it is probably $0. He doesn't own any products or intellectual property, which dramatically lowers the value of a business unless there is a very large recurring sales base.

But, it sounds like this opportunity to give you entry into a market, and in 5 years your business may go in a completely different, very profitable direction that it is now.

Good luck.
 
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highhertel

Member
maximumpsi said:
If you haven't already, check out the distributor contracts. Many can be cancelled by the mfg with 30 days notice.
People buy from people because of relationships. Are his customers retiring, in which case the new contacts may not be as loyal? Are his customers buying because they like the current owner, or because the products have a significant competitive advantage? An earn-out clause protects you from these risks. Inventory and equipment have a very low value -- to banks it is probably $0. He doesn't own any products or intellectual property, which dramatically lowers the value of a business unless there is a very large recurring sales base.


But, it sounds like this opportunity to give you entry into a market, and in 5 years your business may go in a completely different, very profitable direction that it is now.

Good luck.
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Sending in the offer to purchase today, wish me luck.

The customer base is made up of over 120 OEM manufacturing customers. Business has done well due to current owner's customer service i.e. prompt delivery, competitive pricing and stocking program. I have several lines I would add to the offering to help diversify the business a little.

HH
 
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highhertel

Member
Counter offer for business accepted. Home in OR. on market for 1 week, 5 showings and 3 offers....sold through flat rate realtor (saved about $10k this route vs. full service broker).

Do the paperwork shuffle for both and we are off to the races.

HH
 
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highhertel

Member
Thank you. Already have several manufacturers line up to add to the product offering. Business is an industrial fastener supply house, I will be expanding into the HVAC market, specifically ducting supports and accessories.

Taking a little vacation before we move back to WI and jump in.

HH
 
H

highhertel

Member
garyl62 said:
Congratulations, what part of the state will you be located?
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My initial territory I plan to have is a triangle from Green Bay to Madison to N. Milwaukee. Looking to relocate somewhere in the middle, south/west of Fond du lac. Now to find a nice chunk of land (20-40 acres wooded), away from mega farms, wind mills and stone quarries lol.

HH
 
S

sjb

Member
highhertel said:
My initial territory I plan to have is a triangle from Green Bay to Madison to N. Milwaukee. Looking to relocate somewhere in the middle, south/west of Fond du lac. Now to find a nice chunk of land (20-40 acres wooded), away from mega farms, wind mills and stone quarries lol.

HH
Click to expand...

I know the area you are looking to relocate well, live on the NE side of winnebago. Nice people, good recreation and not too far from some excellent sledding. But looking for 20-40 acres away from mega farms, wind mill and stone quarries, not gonna happen:). But I believe you are just joking. Let me know if there is anything I can help with your move or relo.
 
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highhertel

Member
I am from Chilton originally, so I know NE WI well. Don't plan to live there, way too close to family if you know what I mean. Right now concentrating on areas in Columbus, Marquette or Green Lake counties. Lots of nice natural areas there with good hunting and fishing opportunities. Many 20-40 acre spreads to pick from.

HH
 
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