Need some help

[momtohaley2004]

I've been selling my inventory at greatly reduced prices in order to make room for a nursery in my home. I have been contacted by another company who recently bought out some other small candle businesses in the area (3 to be exact) and they are wanting to purchase my business and it's inventory. They are an LLC in the general area. They said to sit down and give them an actual number and negotiations could start with them willing to pay the contract/selling fees. I've never sold a business before so how do you figure out what your business is worth. I can say that I'm at a 3000 dollar loss this year after you include supplies I've ordered, legal fees, travel, etc versus income I've received. I have several wholesale accounts but at the time their orders are just trickling in slowly and not in mass quantity like before. My website generates orders from all over the United States. They want to purchase my rights to the business, my inventory, everything. I don't know how to figure a price for the business. Do I figure my costs over the last 2 years, go by the cost of what my inventory is, or what? I've already explained to them that I have several thousands of dollars invested but they said that is fine. Anyone willing to offer advise on how to come up with a number that won't be cutting my throat. The only reason I'm even considering selling is due to slow sales and the fact that I probably won't be doing too much candle work once the baby comes. That and with this pregnancy I can't stand to smell most of my scents much less make a product with them. I'd like to at least get enough from the sale to make it worth my time to figure up everything. Anyone help? I won't be around until this afternoon to check the replies as my daughter has swim lessons in thirty minutes. I'll check them when I get back though. Thanks everyone.

[soapmom25]

I'm not an expert by far, but my opinion would be that if you're wanting to sell it because sales are slow and you can't prove that it's generating a steady income, then it's probably not worth much. Kinda like selling a car ... doesn't matter what you paid for it (i.e. put into it), it's whatever it's worth the day of the sale, which is always drastic less than the starting value.

When I was looking to sell my biz I was told to start at 3 times annual sales. With that you should be able to pay off any biz debts, plus give you plenty of cushion. Chances are you're not really going to get that much, but it's a high end starting point.

If it were me I would just call my accountant and ask. Even if they charge you for the call and/or a bit of time to calculate the numbers, at least you'd have a "good" idea of what is realistic.

[momtohaley2004]

I'm not an expert by far, but my opinion would be that if you're wanting to sell it because sales are slow and you can't prove that it's generating a steady income, then it's probably not worth much. Kinda like selling a car ... doesn't matter what you paid for it (i.e. put into it), it's whatever it's worth the day of the sale, which is always drastic less than the starting value.

quote]

On this note just wanted to say that I"m not selling because sales are slow but more because I'm at a point where I know that I need to move the product to make room for the baby and I don't know if I can keep up with my business once the baby is here. Sales for me usually pick up in August. It's slow but steady Feb thru July usually. Coincedentally now that I said wholesale is slow 3 of my wholesalers placed an order this morning...sigh

[ebcandles]

I would start with my accountant and my attorney. THey should be able to help. Otherwise, I would contact the small business association.

[coconut]

Unless you have decided to quit the business, I would not sell to them because then you will lose the right to all of what you have worked for-your name, your accounts, trademarks, recipes, everything. Down the road you would be starting from scratch. Just a thought....

[momtohaley2004]

IF I decide to sell to them I wouldn't intend to be doing the candle business anymore. Would spend that time focusing on family.

[sockmonkey]

You don't need to answer these here, I'm just saying these are worth considering:

How many years have you been in business?

How many accounts do you have--whether or not they currently order?

How much has each account bought during each year?

Who are your top ten buyers?

What are your yearly sales?

How many products do you sell?

What is your most popular product?

Of your yearly sales, what percentage is derived from the most popular product?

Which product makes the most profit for you?

What is the current value of inventory you have on hand?

How much outstanding debt do you have on credit cards or loans for the business?

If you shut down your business will you still be under contract for credit card processing or web hosting fees?

In some cases, what buyers are really interested in is your customer list. It saves them all the work of trying to drum up new business from scratch and gives them an automatic foot in the door, and that's valuable.

Breaking down the stats above will give them insight into the potential to make money from your products. Buyers can still be interested in your company even though you are not making a profit overall.

In factoring how much you should ask for, three times your net profit is common, however there are other intangible factors, such as the value of your customer list and the exposure you have received on the internet--whether people bought from you online yet or not.

If you aren't making profits though, then you should go by the value of your assets and the intangibles--something only you can assign a value to.