Posted:  16 Mar 2014 19:22
Registered User Currently Offline Join Date: Mar 2014	Posts:  2 Reputation: Unranked User Rank: 1 - Seedling
I have been in business for 30+ years and am ready to retire.  Of course I want to sell the business and would like some help to determine a selling price.  I have a 10 year old van and 5 small and 1 40 gallon aquamate machines.  Thanks for any suggestions in determining a selling price.

Posted:  16 Mar 2014 21:31
Registered User Currently Offline Join Date: Jan 2011	Posts:  798 Reputation:  43 User Rank: 10 - Blossom
The value of your accounts is a fairly objective number at first glance (at least to you), but to a prospective buyer, it's a horse of a different color.  The conventional wisdom on valuation of accounts secured by at least a one-year service contract is somewhere between 3-6 months' recurring revenue.  That might seem like a very stingy number to you after 30+ years of building this business, but to a buyer who is looking at balancing the book value of your accounts with the possibility that any number of them might cancel within the first year after transition (thereby gutting the investment the new owner has just made in them) is a dicey proposition.  Since contracts customarily have a 30-day out built in, they are not really secured in any meaningful way.  Lease accounts with a year or more left to run on the original minimum term would be considered much more valuable and secure, because they have built-in early termination penalties (or SHOULD have) that make cancellation unlikely.  And then there is the specter of potential office closings/consolidations/relocations and clients just closing up and going out of business. In the end, a business is worth whatever you and the most promising potential buyer can agree it's worth.  The value of the equipment (van, watering machines, tools, etc.) is not a very significant aspect, more of a throw-in to entice the buyer to close the deal and have a turn-key operation with which to start.  Unless there is real estate involved, you're really only selling the accounts, and as I said earlier, you can expect about 3-6 months' recurring revenue as a pretty fair starting point on which to negotiate a sale.

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