Dear List-Server Colleagues,
I’m sure many will be fairly disappointed with my meager results, I know I was. As I rather suspected when I submitted my initial inquiry, the secondary requests for sharing this information would be rather long and the practical information itself would be rather short.
I’m sure nearly every practitioner reading this has fielded at least a variation of the following question, “how much does a leg cost”? Well, we usually laugh and say, “that all depends.” I guess I must have asked a similar sort of question in regards to the fair market value of a business. I often tell patients, simple problems simple solutions, complex problems complex solutions.
I’m afraid the simple answers and formulas may not exist. I did receive a couple of offers from professional consultants, one even promised to answer all my questions at no charge or obligation.
I also received two results that pointed me towards some actual working formulas. There is a short article by Barry Smith Esq. in the O & P Business News. The article link is here: http://www.oandpbusinessnews.com/view.aspx?rid=75907 My honest impression, his formula appears to weigh more heavily in favor of the seller than the buyer.
One experienced respondent who has both bought and sold, recommended using EBITDA with a multiplier of 3x’s to 7x’s based on the asset values. For those of you not familiar with this concept just Google EBITDA. There is more than an abundance of information available. Just keep in mind that there are some very valid criticisms of this system as well.
There were two references to a couple of obscure “go to” people submitted, one couldn’t remember the consultants actual name, the other wasn’t certain if the individual he recommended could actually help or not.
I am still waiting to hear from one respondent whom I emailed back after receiving his initial email.
The few others who did bother to respond mostly presented generalized or vague advice.
I believe that when it comes to either buying or selling a business it is still a highly subjective personal experience. Just keep in mind these two concepts, “Caveat Emptor!” and “whatever the market will bear.” If you can’t even read a profit and loss statement, then I suggest you probably require the services of a professional to assist you. I believe a good place to start is a reputable local accountant or attorney who is familiar with facilitating business transactions.
Again I want to thank everyone who responded and if I receive any additional earthshaking insights I will post them forthwith.
Sincerely and with my best professional regards,
Kim L.Ruhl CPO/LPO
