Go Back   English Forum Switzerland > Living in Switzerland > Business & entrepreneur
Reply
 
Thread Tools Display Modes
  #1  
Old 28.08.2015, 12:20
Newbie 1st class
 
Join Date: Oct 2010
Location: Canton Bern
Posts: 21
Groaned at 0 Times in 0 Posts
Thanked 5 Times in 2 Posts
Barna C. has no particular reputation at present
How to determine value of small business?

Help!

My husband and I are looking into buying a small business from its previous owner. The price we were given seems too high but we really have no idea as to how to judge how 'valuable' a business is. Do you go by how much it brings in a year? Before or after taxes, etc? Or by how much the owner actually pockets in a year after taxes, salaries, etc.?

Any advice is GREATLY appreciated! Thank you!

Last edited by Barna C.; 28.08.2015 at 12:58.
Reply With Quote
  #2  
Old 28.08.2015, 12:24
Forum Veteran
 
Join Date: Mar 2008
Location: ZH
Posts: 1,464
Groaned at 7 Times in 7 Posts
Thanked 2,223 Times in 822 Posts
doropfiz has a reputation beyond reputedoropfiz has a reputation beyond reputedoropfiz has a reputation beyond reputedoropfiz has a reputation beyond reputedoropfiz has a reputation beyond reputedoropfiz has a reputation beyond repute
Re: How to determine value of small business?

Please, whatever else you post here, make sure it is really, really discrete and anonymised. Switzerland is a small country, and every sub-group is even smaller. Remember that there are many users of this forum who teach languages. And besides, in this culture business deals are generally kept very private.
Reply With Quote
This user would like to thank doropfiz for this useful post:
  #3  
Old 28.08.2015, 12:36
Today only's Avatar
Forum Legend
 
Join Date: Dec 2010
Location: Europe
Posts: 3,706
Groaned at 482 Times in 292 Posts
Thanked 3,929 Times in 1,961 Posts
Today only has a reputation beyond reputeToday only has a reputation beyond reputeToday only has a reputation beyond reputeToday only has a reputation beyond reputeToday only has a reputation beyond repute
Re: How to determine value of small business?

I'd be very careful here or you're going on a mega sized ride.....
Reply With Quote
This user would like to thank Today only for this useful post:
  #4  
Old 28.08.2015, 12:45
Forum Veteran
 
Join Date: Dec 2012
Location: Aargau
Posts: 1,559
Groaned at 12 Times in 11 Posts
Thanked 1,809 Times in 880 Posts
Mullhollander has a reputation beyond reputeMullhollander has a reputation beyond reputeMullhollander has a reputation beyond reputeMullhollander has a reputation beyond repute
Re: How to determine value of small business?

Here's a company that values businesses. There are probably others in Switzerland too:

http://www.businessbroker.ch/Dienstl...S/Default.aspx
Reply With Quote
This user would like to thank Mullhollander for this useful post:
  #5  
Old 28.08.2015, 12:51
newtoswitz's Avatar
Forum Veteran
 
Join Date: Jan 2010
Location: Rapperswil
Posts: 1,158
Groaned at 15 Times in 13 Posts
Thanked 1,310 Times in 596 Posts
newtoswitz has a reputation beyond reputenewtoswitz has a reputation beyond reputenewtoswitz has a reputation beyond reputenewtoswitz has a reputation beyond repute
Re: How to determine value of small business?

I'm not an expert, but I suggest the value of this business is simply in the effort already expended and the existing order book.

If you set up from scratch, how much time and effort would you need to invest to get to where this business is? I.e. do they have a brand, recognition, contacts that are worth something?

Do they have an existing, reliable order book that you are buying?

Subtract however much loss of customers and staff you would you expect??
Reply With Quote
This user would like to thank newtoswitz for this useful post:
  #6  
Old 28.08.2015, 12:59
Newbie 1st class
 
Join Date: Oct 2010
Location: Canton Bern
Posts: 21
Groaned at 0 Times in 0 Posts
Thanked 5 Times in 2 Posts
Barna C. has no particular reputation at present
Re: How to determine value of small business?

Thank you everyone!
Reply With Quote
  #7  
Old 28.08.2015, 13:03
Veltliner's Avatar
Senior Member
 
Join Date: Jun 2015
Location: ZH / SZ
Posts: 272
Groaned at 3 Times in 3 Posts
Thanked 339 Times in 128 Posts
Veltliner has an excellent reputationVeltliner has an excellent reputationVeltliner has an excellent reputationVeltliner has an excellent reputation
Re: How to determine value of small business?

For an established company, and a very small unlisted one, "Discounted Cash Flow is most standard". Basic premise is, how much usable cash is generated by the company, for the life of the company, and because cash next year is worth less than cash today, applying a discount factor to cash generated in the future.

I'd recommend hiring a professional!
Reply With Quote
  #8  
Old 28.08.2015, 13:05
Forum Veteran
 
Join Date: Sep 2011
Location: Letzeburg
Posts: 1,970
Groaned at 68 Times in 51 Posts
Thanked 5,005 Times in 1,780 Posts
crazygringo has a reputation beyond reputecrazygringo has a reputation beyond reputecrazygringo has a reputation beyond reputecrazygringo has a reputation beyond reputecrazygringo has a reputation beyond reputecrazygringo has a reputation beyond repute
Re: How to determine value of small business?

it depends upon the nature of the business, how many assets it has, etc. for very small businesses, people will often look at the net income available to be distributed to the owners and then multiply by 3 to 5 (which assumes it will take you 3 to 5 years to recover the purchase price for the business).

the most important thing is to be 110% confident that the business will continue to make money after the current owners are no longer around, since very often the value of small businesses is really in the network and goodwill that the current owners have built in the community (and that can be very hard to replicate).
Reply With Quote
The following 2 users would like to thank crazygringo for this useful post:
  #9  
Old 28.08.2015, 13:07
Forum Veteran
 
Join Date: Dec 2012
Location: Aargau
Posts: 1,559
Groaned at 12 Times in 11 Posts
Thanked 1,809 Times in 880 Posts
Mullhollander has a reputation beyond reputeMullhollander has a reputation beyond reputeMullhollander has a reputation beyond reputeMullhollander has a reputation beyond repute
Re: How to determine value of small business?

An article on valuing a small business:

http://www.japantoday.com/category/o...kaiwa-business
Reply With Quote
  #10  
Old 28.08.2015, 15:42
Forum Veteran
 
Join Date: Feb 2014
Location: The World
Posts: 621
Groaned at 98 Times in 52 Posts
Thanked 395 Times in 215 Posts
Capo is considered unworthyCapo is considered unworthyCapo is considered unworthy
Re: How to determine value of small business?

There are many ways to value a business... There won't be a single number.

If you give here some hints about what the business is about, maybe I can give you a rough way to value it.
Reply With Quote
  #11  
Old 28.08.2015, 15:44
Forum Legend
 
Join Date: Jun 2008
Location: Zurich
Posts: 4,642
Groaned at 152 Times in 118 Posts
Thanked 9,549 Times in 3,211 Posts
k_and_e has a reputation beyond reputek_and_e has a reputation beyond reputek_and_e has a reputation beyond reputek_and_e has a reputation beyond reputek_and_e has a reputation beyond reputek_and_e has a reputation beyond repute
Re: How to determine value of small business?

go here:http://www.bbc.co.uk/programmes/b006vq92
Reply With Quote
This user would like to thank k_and_e for this useful post:
  #12  
Old 28.08.2015, 16:04
Yopo's Avatar
Senior Member
 
Join Date: Apr 2007
Location: Lausanne
Posts: 314
Groaned at 10 Times in 4 Posts
Thanked 230 Times in 122 Posts
Yopo has earned some respectYopo has earned some respect
Re: How to determine value of small business?

Very HIGH level rule of thumb: if the return on sales is above 18-20% then the business value COULD be around the same number of the net sales figures for one year. Of course, Growth prospects, Intellectual Property, inventory, location, etc, etc, and 1000 of more etceteras count on the final price. Just a starting point idea, so you need to take in consideration many other things before buying or discarding.
Reply With Quote
  #13  
Old 28.08.2015, 16:07
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 13,716
Groaned at 209 Times in 181 Posts
Thanked 11,029 Times in 6,254 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: How to determine value of small business?

If the current owners are running the business then it's possible the business will not continue to do so well when they leave. Look at gross profits, then deduct any salary that needs to be paid to employ someone to run the business then multiply x 4. If the business has any assets then do not pay any extra for them, their value is accounted for in the profits they produce.
Reply With Quote
Reply

Tags
new business, small business




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How to determine resale value of imported vehicle Cailin_74 Transportation/driving 6 26.07.2014 23:35
How to start a small business in Switzerland for EU citizen? Dainius Permits/visas/government 10 12.05.2013 21:34
Anyone know how to determine a rabbit's gender? st2lemans Pet corner 14 27.04.2011 12:10
How to determine Opel corsa value? SWISSMISS143 Transportation/driving 11 04.12.2009 13:40
How to determine postal code from address axxxxe Daily life 2 22.08.2009 16:10


All times are GMT +2. The time now is 10:09.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2016, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0