What would I expect to pay for this business?
A little background first, I currently work for a company, that was built from the ground up by one man. He has been in business for 30 years and every new year continues to be a new record for sales. I currently manage one of the stores and was just wondering if I were to purchase it what could I expect to pay for it? My store made 2.4 million this year in sales, and I don't know what I would be looking to pay to get this store from him, and keep the same name. He has been approached many times from people asking him to sell and franchise but he won't do it for anybody but his managers. I am 23 years old with 600 credit scores, but a heck of a sales pitch (sales say it all). Also he said he would sell the company for the right amount of money, which earns between 25 and 35 million a year in sales, any idea what that price tag would be? We will be sitting down to talk about it all, I just want to know what to expect.
I am wondering about the store alone and the entire business, I think it is around 2 years of income but I dont know.
- David545Lv 51 decade agoFavorite Answer
There are several ways to determine the fair price for selling/buying a business. The one you mentioned is based on a multiple of annual net income.
To buy a business for only 2 years worth of net income is extremely low. Ask yourself the question, "why would the buyer sell a business that is very profitable for an amount that he could make every two years? It's definitely a good deal for the seller, unless he has some extenuating circumstances, such as poor health, which would cause him to want to make a fast sale.
For a business that is well established, a 4-time multiple is of earnings as a purchase price is considered to be a "no-brainer" for the buyer. It is not uncommon for sales to be made for 5 or even 6 times annual earnings, especially if the business has a dominant market position.
The price tag is just one of the issues to be considered. How to pay? is a major factor, since you likely won't have the cash to do the deal. Ideally, you will find that the buyer will be willing to finance the deal with as little down payment as possible. (That way, in effect, you buy the business from earnings the business generates.)
I have been through this process a few times, as both a buyer and a seller. If you get into the point where you are ready to approach the buyer, e-mail me. I'll be happy to tell you more.Source(s): I've done this several times, as both buyer and seller.
- karen vLv 61 decade ago
50 to 75 million dollars.
- 1 decade ago
i don't know