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How do you price your business for sale?


candlelady
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Ultimately it will come down to how much someone will pay for your business. You can ask $100,000,000 because that is what you think it is worth but if the most you ever get offered is $1,000 then that is what it is worth.

Yes, you may have LOTS of expenses involved with what you are selling but if you close up now and do not sell, how much of those expenses will you see a return on....none. But, if you sold for even $1,000, that is $1,000 worth of expenses you DID manage to recover.

Your best bet would probably be to accept offers and when you receive one that you feel is ample, accept it.

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You may have a tough time pricing a biz for sale in this economy. I don't have any advice on pricing so can't help you there. I would however make sure you draw up a contract thats negotiable when an offer is made and pending the buyers ability and time frame to purchase. Another words make sure you can counter offer if you want to make changes or are not 100% with the buyer's offer.

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I would think your customer base is worth more than any thing that you have.

You can research learn how to make a candles online,you can come up with a supplier list,fragrances,jars etc...yes,it does take time to finally come up with the perfect candle.But the end results is to sell,sell,sell.

So I thing your customers are the most valuable thing you have for sell.

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Call your accountant for assistance or a reference.

Each business is different. Wholesale account? Retail accounts? Locations selling your products? Professional-grade equipment? Some businesses hold their value well and appreciate beyond the ACV of products, materials & equipment; others do not. This is a specialty area where "rules of thumb" are NOT generally applicable. Too low screws you; too high yields no offers. Ideas on where to market your business are important, too. Please consult a professional to get the most accurate opinion on the market value of your business.

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When I sold my old business (2004), I started price at $8,000. Dropped to $5,000. Had 3 people interested. All said that the price was very reasonable; but none could come up with the money for various reasons (loans, hubby, etc). I finally negotiated a deal with someone for $3,500. This included 3 wholesale accounts, 100+ customer list, supplies, equipment, recipe, training, business name, website. My final year profit was $3,500.

Unfortunately, she never really did much with my baby. :cry2: Wholesale accounts told me her quality wasn't there.

hth,

Trudi

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When I sold my old business (2004), I started price at $8,000. Dropped to $5,000. Had 3 people interested. All said that the price was very reasonable; but none could come up with the money for various reasons (loans, hubby, etc). I finally negotiated a deal with someone for $3,500. This included 3 wholesale accounts, 100+ customer list, supplies, equipment, recipe, training, business name, website. My final year profit was $3,500.

Unfortunately, she never really did much with my baby. :cry2: Wholesale accounts told me her quality wasn't there.

hth,

Trudi

That sucks Trudi. I can only imagine how sad that must make you feel.:undecided

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There are really several ways to price a business. Theres

Book value: current value of assets - liabilities

Earnings multiple: take your yearly profits and multiply them by some number

Discounted cash flow: most complex method that involves projecting the company's cash flows out into the future (10-20 years) and then using a discount rate that corresponds with the desired return on investment and discounting those cash flows to present value

For businesses like ours, you'll want to use either book value or earnings multiple. For the earnings multiple method, multiple your average yearly earnings by a number between 1 and 2. That's about that price someone would be willing to pay for a small candle business. If you're not turning a profit or a turning a very low profit, use the book value method instead. Then when you talk to potential buyers, emphasize to them how you came to your price and why its a good deal. If you use book method, don't talk about profits but instead emphasize that they're getting a fair deal on the equipment, inventory, etc. If you use earnings multiple method, emphasize how quickly they'll make back their initial investment (i.e., 1 to 2 years).

If all else fails and your business is large enough, you can contact a business broker in your area. I'm sure there are several in Texas.

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You still have to figure in what businesses are selling for in your area. Just like the housing market its what the market value for your biz will be. You may figure your biz is worth $25,000 but the current market value could be much lower, or higher. Best to get a professional opinion on how to price both the real and market value so you can price at a saleable price. Like someone else mentioned earlier, the market value price is what it actually sells for.

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Thanks everyone for your ideas and suggestions.

I did come up with a price based on:

Company Name

Domain name, website with graphics

Supplier List

Wholesale Customers (they are all going to stay with the new owner as long as he/she creates the same product, no changes)

150 lb. wax melter

Training

Scent and color recipes

Tons of retail and wholesale email addresses

Anything else over above is sold separately, only because I'm still pouring and using my current inventory.

I know the economy will play a big part if it doesn't sell. BUT, I'm not going to "give away" my business. I've worked way too hard to just take a couple thousand... If I don't sell it, that's OK too, I'll just sell my equipment/supplies and move on.

One thing that I have done to protect myself after I'm officially closed is keeping my liability insurance, at least for a couple more years. I dropped the equipment/supply coverage and raised the deductible a bit. Dropped the yearly cost by $125.

We shall see. My official close date is March 31st. :yay::(

Carrie

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Some recipes are very generic and anybody can do those. There is one in particular that I created, that is my best seller all year, that I included in my price. They may want to copyright, I won't.

Oh girl, I won't be doing this as a business anymore. I'm done. Really. But it's funny, that when I come on the board everyday, I still check the classified for deals! LOL Habit....

I have a question. If you are selling your recipes are you then still allowed to use them? Just in case you decide to start a new biz later you may want to keep copyright and not sell that; just the recipes.
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