Selling Share In Business

[mr_lob]

Hi guys – anyone got any idea on how you work out the value of a business?

My partner wants to sell his 40% share of our business here in Thailand.

Can anyone provide a calculation for working out the value of the share- I know this 5 year thing but need to know, should I include:

* salaries

* Advertising

Running costs

….and should these also increase 20% year on year?

Cheers!

[Sunbelt Asia]

Hi guys – anyone got any idea on how you work out the value of a business?

My partner wants to sell his 40% share of our business here in Thailand.

Can anyone provide a calculation for working out the value of the share- I know this 5 year thing but need to know, should I include:

* salaries

* Advertising

Running costs

….and should these also increase 20% year on year?

Cheers!

Take the owners discretionary cash (which is an amount equal to the sum of pretax net income, owner's compensation, interest expense, depreciation, owner's perks, extraordinary losses and discretionary expenses less extraordinary gains and income)...multiply by 2.5 times than multiply it by 40%.... minus 40% of the liabilities and add 40% of the receivables cash and deposits back.

### From the gross income you would minus the COG, employees salaries, utilities, advertising, rent)

Usually, the owner's Discretionary Cash flow ranges between 10% and 20% of the total sales of the business. Please keep in mind this is a rule of thumb and there are exceptions. Service businesses, for example, can easily have a discretionary cash flow equal to 20% to 50% of the annual sales.

Experience has shown that the majority of Main Street businesses sell for 2.5 to 3.0 times the owner's Discretionary Cash Flow. Again there are exceptions to this in either direction. A very desirable business could easily sell for more, while a lower asset, easy to duplicate business that has not established a brand name or loyal clientele may sell for as low as 1.0 to 1.5 times Discretionary Cash Flow.

"and should these also increase 20% year on year?"

Most people buy a business based on its potential but they sure don't as the buyer want to pay for their own hard work to get that potential. Hence use the evaluation on this business on the past history not the future for the fair evaluation. Your business plan of course will take in account the future and if it’s feasible. By the way, 20% increase in costs is rather high in most cases unless of course the sales increase as well.

www.sunbeltasia.com

[Carmine6]

Hi guys – anyone got any idea on how you work out the value of a business?

My partner wants to sell his 40% share of our business here in Thailand.

Can anyone provide a calculation for working out the value of the share- I know this 5 year thing but need to know, should I include:

* salaries

* Advertising

Running costs

….and should these also increase 20% year on year?

Cheers!

If there's a lot of money involved, you may want to spend a little money and talk to someone like maybe Sunbelt about your specific situation. I've seen some unbelievably lopsided deals, and most of those wouldn't have been had the screwed side just gotten a little help.