How to value a one owner part time business?

[orezok]

I would ask the seller to have his attorney prepare a “non-compete” document. That way he could provide full details of the business without risk and you would be better able to evaluate.

If he is not willing to spend a couple of hundred dollars that is your key to walk.

 

[LittleBill21]

I'd be interested in hearing more..

 

[otlski]

Fully agree with plowhog. A multiple X3 on EBITDA (profit) would be approximate for businesses under one million dollars of annual revenue. Revenue being what you take it by charging your customers, not your profit. From the X3 starting point, it goes up or down depending on whether the application/market is hot and growing, can grow the market share, can sustain that growth, can be made more efficient, and is not easy to copy. Sounds like his business is easy to copy otherwise he would not worry about divulging more.

I would say less than 100K but this business sounds so small that the rules only marginally apply.

 

[Frankenkubota]

Not more than a years' net profit. Probably less than that.

i've always heard 1 years net profit but that almost impossible to prove, usually 2 sets of books.

most small businesses are sold with owner finance. the logic there is...if it's a real deal then the owner shouldn't object to financing it, at least short term.

right

good luck

 

[workinonit]

This business has no profit. It's a zero balance from what I'm gathering. You can't count your wages as profit. So normal valuation rules do not apply.

 

[TheMan419]

The usual rule of thumb for selling businesses is 7x annual revenue but that's probably not applicable here. If he's willing to carry a note then he'll probably get more, but that's more risk than an up front payment.

It's going to be hard to sell if he can't give details for fear of people stealing the idea.

7x annual revenue? Where do you get that? I had a business valuation done recently for a business I may purchase. The accountant's final number was nowhere near 7x annual revenue. It was maybe 2x annual net profit.

 

[Diggin It]

If I knew more (which I don't) and was interested (which I might be), I might offer to buy whatever inventory and supplies and give him/her half of the first two year's income.