# putting a value on an existing business



## jlsconstruction (Apr 26, 2011)

And it was snowing


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## Roofcheck (Dec 27, 2011)

Roofing in Rutland, VT today- almost 50 and sun, sun, sun. There are was no snow fall.


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## jlsconstruction (Apr 26, 2011)

Roofcheck said:


> Roofing in Rutland, VT today- almost 50 and sun, sun, sun. There are was no snow fall.


It was really nice here today.


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## Roofcheck (Dec 27, 2011)

getch said:


> does anyone have any insight on establishing a ballpark value to an existing business. I'm looking into purchasing a excavation company, I'm ok with establishing the value for all the equipment. I am thinking they want to much for the business itself. I am wanting to get a close ballpark figure before I get appraisers involved. Any Ideas?


I've bought and I've sold businesses and a couple things that send a red flag- your man is willing to stay on for 5 years? That is quite some time IMO. 

Selling business should mean the man is 1. Tired of this business 2. Under financed to take it further or 3. Partner up with someone to take it to the next level. 
So youve got to ask, why is he really selling?


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## jaydee (Mar 20, 2014)

IN MY OPINION:

business is worth:

1) equipment, tools and stock.

2) pending business contracts, signed with you as new owner/ payee

3) business name and website owner ship.


He can say he will stay and help for 5 years. ( what if he drops dead tomorrow.

What if all the employee's and or mechanics, up a leave. (they're at will ) ????

*paying for anything more is just a waste of your money.*


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## burntside bob (Sep 27, 2010)

A small business is not a company traded on a stock exchange with all kinds of valuation methods, price earning multiples etc.
Putting a price on a small business and especially a mom and pop business which your business is, has no value other then its auction value of assets minus what the business owes to creditors and the government.
Really - a small mom and pop construction company owner creates value because of what they do with their firm, and are you thinking that value transfers to the business when its sold. Step back think!! That is no value that you should pay for. You may not be able to duplicate the juggling act that the present mom & pop owner does.
Very small (mom & pop) small businesses have no value other then assets minus liabilities.
Larger small construction business with established market share and substantial assets have value over the firms asset value, but I'm talking of a firm with over $50 million in revenue, which in today's world is still a small firm.
Mom & Pop firms are too easily duplicated in the market place.
Why do you want to be a business owner yourself??
You do know that the time that you will put into this business and the wages you will take out of it results in probably less per hour then what you will pay your best employee. 
O big deal; you get a fancy over priced company pickup to drive around in, that your new firm can not afford.
And maybe even less then the minimal wage!! 
Hours worked in firm divided by wages taken out; for many mom & pop owners equals less then the minimal wage or just above it. And that's the truth.


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## ESSaustin (Mar 27, 2010)

Unger.const said:


> Do you get to pick the first 3yrs of business? The last 3 years? The best 3 years? The worst 3 years?
> 
> Even if the clients and the staff stayed. Doesn't mean the economy and competition will be the same.


Last three years sales is a common formula used.


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## Moxley-Kidwell (Jan 28, 2011)

ESSaustin said:


> Last three years sales is a common formula used.



If this is the case I've got a nice excavating company he can come buy. I'll sell tomorrow!! We even do paving, two for the price of one! He'll I'll even give a 10% cash discount.

Unless there are some good multi year contracts or a big backlog of work I'm with a lot of others here, figure out the value of the equipment and all other assets and start there. With small businesses like ours the customers are buying the owners/managers a hell of a lot more than the name.


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## aj3580 (Jan 13, 2014)

Coming from a guy that just started and looked at every option for starting I came up with this . If I am gonna buy someone else's business all I would give them is fmv of the equipment even if they go for that I still don't know the business aspect to it. Starting small and building your business in my eyes is better your overhead will be lower and when you screw up on a $1000 job it's better than a 50k or more job. One thing to ask is what is his company for x amount of dollars providing you that you cannot do on your own with your own learning curve in due time , is his work better than what you would provide ? Does his company name sound better ? Like the other guys on this site said unless he has contracts in hand it's not worth more than the equipment that does the work . My 2cents


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