Business Valuation In Thailand?

[steelepulse]

Is there some sort of valuation number for SME businesses in Thailand whether buying or selling for a brick and mortar business? This could be a multiple of gross monthly turnover, or gross profit etc. Is there such a standard or it is more like real estate where a crazy number can be asked for with no supporting reasons behind this?

[mark5335]

I don't believe there are Thailand specific valuation norms. From discussions I've had with local advisers, the usual methodologies apply. For example:-

- multiple of EBIT

- multiple of free cashflow

- net tangible assets

etc

With regards to multiple of EBIT, the multiple applied to the valuation would depend upon how long the business has already been established, growth trajectory, & industry average multiples (if applicable). As a general guide, for a business with a good history of recurrent earnings and reasonable growth rate, typically the valuation would be 5x EBIT.

[steelepulse]

Sounds as good as any, thanks.

[chesternim]

It does not matter what the statistics are in Thailand - you should use the universal formula to determine the multiple of profits that you should use for buying or selling a business.

If the business makes over $2million a year, has traded with consistent profit for the last 3 years and has a sufficiently diverse client base then it is listible. In which case a multiple of 10 times EBIT is average. For a property company the multiple would be lower - around 5 times and for IT and medical it would be higher - say 20 times.

For Trade Sale the multiples are much lower. Investors are looking at a minimum of 30% per annum on their investment capital compared to 10% which is sufficiently attractive for a listed company.

To do the maths as a trade sale the multiple has to be between 2 and 4 times. At 2 times the profit is 50% and at 4 times it is 25%. It depends on the type of business, consistency of profits, ease of running and heaps of other factors.

It does not really matter what the value of equipment is unless it is run down and needs replacing.

Regarding valuing stock - if there is a lot of unsold stock on the shelf what does that tell you about the business? So don't pay much for that.

If yo are selling a business don't load it up with stock or assets such as property that will make it harder to sell.

Offering vendor finance and a structured sale - so that say 20% is held outstanding for 12 months and used to adjust the price in line with expectations might just swing the deal.

If you need assistance managing the Gains Tax on sale or acquisition email [email protected]

Best wishes

[wolfmanjack]

i have never figured out why some people claim a valuation of a business based on gross sales. In my opinion a business with 2 million sales and 1 million net profit is worth more than a business with 10 million sales and only 500,000 net profit.

[SolarOhm]

i have never figured out why some people claim a valuation of a business based on gross sales. In my opinion a business with 2 million sales and 1 million net profit is worth more than a business with 10 million sales and only 500,000 net profit.

There are many people who have little or no formal training or qualifications in accounting and business valuations, And there are many ways to look at a Camel. There are many factors to consider in valuing a business for sale - and others if yuo are trying to sell one.

Years in business and consistency of sales and profits are very significant. A new business that shows a profit in one year is not as valuable as one that can show 3 years of consistent and growing prosperity.

With regard to your example - if the business making the $million has only 1 or 2 principal customers the business could fold real quick if it lost just one of its customers - or both.

With acompany with $10mill in sales and a diversified list of clients where the loss of 1 or 2 customers would make little difference to the ongoing sustainability of the business there are adequate reasons for valuing that business up = especially if there isscope for increasing sales and profits - compared to a smaller business with a limited market.

[Pingis]

It does not matter what the statistics are in Thailand - you should use the universal formula to determine the multiple of profits that you should use for buying or selling a business.

If the business makes over $2million a year, has traded with consistent profit for the last 3 years and has a sufficiently diverse client base then it is listible. In which case a multiple of 10 times EBIT is average. For a property company the multiple would be lower - around 5 times and for IT and medical it would be higher - say 20 times.

For Trade Sale the multiples are much lower. Investors are looking at a minimum of 30% per annum on their investment capital compared to 10% which is sufficiently attractive for a listed company.

To do the maths as a trade sale the multiple has to be between 2 and 4 times. At 2 times the profit is 50% and at 4 times it is 25%. It depends on the type of business, consistency of profits, ease of running and heaps of other factors.

It does not really matter what the value of equipment is unless it is run down and needs replacing.

Regarding valuing stock - if there is a lot of unsold stock on the shelf what does that tell you about the business? So don't pay much for that.

If yo are selling a business don't load it up with stock or assets such as property that will make it harder to sell.

Offering vendor finance and a structured sale - so that say 20% is held outstanding for 12 months and used to adjust the price in line with expectations might just swing the deal.

If you need assistance managing the Gains Tax on sale or acquisition email [email protected]

Best wishes

5 - 10 - 20 times. Well. Yes, can be IF the profit trend is "proven" to be/become much up, I don't agree when it's just dreams

A traditional way to count in Sweden commonly used before Internet businesses started = Back when things didn't change so fast

If the profit has no trends other than economic cyclical differences, then profit sum pf 3 last years* adjusted for costs for expansions and product developing.

Plus "junk value" = such as buildings, products in store, equipment. = Things which can be discussed if not include (parts of) in the deal.

*If it's an up/down trend other than cyclical, then can count with estimated profit for 3 comming years.

(I think similar when I have valued stock market companies to decide which to invest in. Although mostly I look for companies ready to get a turn around (=from minus to plus results