Any Reliable Business Broker?

[drogon]

Greetings to the community.

I plan to relocate to Bangkok and open a F&B business as I have quite a lot of experience in this sector.

I am actually studying the local laws about taxation, patents etc....

Although I do not wish to launch a new business but rather buy an already established one.

I read about sunbelt asia.

Are there any others so I could compare the costs and efficiency?

I intend to become the owner-manager of a bar-restaurant or a bar.

This is a quite urgent request as I move within one month.

Also, any hints (maybe I did not think about everything in my business plan) are welcomed.

Thanks for your answer

[Sunbelt Asia]

Are there any others so I could compare the costs and efficiency

Standard in the industry, is the buyer does not pay any professional fee. Only the seller pays the fee if a business is acquired.

The two other business brokers in Bangkok are

Thai Sunshine

http://www.thaisunshinebusinessadvisors.com

and Biz X-Change

http://www.thebizxchange.com

Sunbelt Asia has seven offices in Thailand, and over 400 Worldwide if you are looking for a business outside Bangkok

Here are some podcasts on people buying businesses in Thailand.

Experience of buying a business

www.sunbeltasiagroup.com

[mark lamai]

oh yeah me too.

finally bought a little bar in samui.

spent 2 months looking pattaya, bangkok,hua hin and other places.

look mate rule no,1 is

THEY ALL LIE TO YOU!

evry last one of them, be they a broker or an owner,

did not meet one semi-honest person.

any figures quoted to you about trading are totally fictitious.

my experience with 2 of the major brokers you see advertising everywhere

(names witheld cause i'm sure it would be censored)

is that they are very sleazy and dishonest.

so get on the ground and look long and slow.

put your own valuation on a business after seeing it every night for at least 2 weeks.

my experience is that the real value is usually about 20% of what they are asking.

be bloody careful

and good luck

[Sunbelt Asia]

oh yeah me too.

finally bought a little bar in samui.

spent 2 months looking pattaya, bangkok,hua hin and other places.

look mate rule no,1 is

THEY ALL LIE TO YOU!

evry last one of them, be they a broker or an owner,

did not meet one semi-honest person.

any figures quoted to you about trading are totally fictitious.

my experience with 2 of the major brokers you see advertising everywhere

(names witheld cause i'm sure it would be censored)

is that they are very sleazy and dishonest.

so get on the ground and look long and slow.

put your own valuation on a business after seeing it every night for at least 2 weeks.

my experience is that the real value is usually about 20% of what they are asking.

be bloody careful

and good luck

I certainly don't think you are talking about our firm and you certainly did not meet me. If you did, its nonsense.

I'm going to repeat the same over and over again" due diligence" just like we do in our paperwork. We didn't make any info up, it comes from the seller. The seller signed a statement it was true and that he could prove it was true, so now its your job to check to see if it true or false.

See below ' Please be aware" Notice the skull and crossbones? You had to sign this to get any information from us along with signing over 6 pages of paperwork along with this paragraph.

By the way, this due diligence paragraph is repeated 11 times in the 6 pages of paperwork just to get any infomation from us about the business! You don't sign, we send you on your way as we want you to do due diligence.

All information and materials provided by SUNBELT to prospective buyers have been initially provided by our client, the Seller. Our client believes the information to be true and accurate. However, accuracy is not guaranteed and all information should not be considered complete. While statements may be presented concerning a matter of opinion, whether or not so identified, they are only statements of opinion and should not be construed to be fact.

You see this very bold print with a font size of 16!

SUNBELT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED. SUNBELT DOES NOT DO DUE DILIGENCE ON ANY LISTINGS. PLEASE UNDERSTAND THIS IS YOUR RESPONSIBILITY TO DO YOUR OWN DUE DILIGENCE!

Once you finally got the profile with the name of the business and address. In bold print in a highlighted box it states " The above information has been secured from the Seller. Sunbelt Business Brokers in no way guarantees the accuracy of the information, nor does it warrant any assumptions as true and correct!"

This is on every profile/listing you would of gotten.

If you acquire the a business. You not only had to sign this paperwork just to get the information but also once again at the closing table. ( we have taken off the skull and crossbones at the closing table and replaced it with big eyes. . a number of buyers thought it was bad luck to see that staring at them at the closing table but we left the text and the same bold print which they must sign.)

So why do we go to this extreme? About a year ago we started this after someone on Thaivisa.com thought we should be doing due diligence for their friend. So I came up with the skull and crossbones which we get signed now to warn someone that if you think we do due diligence, we don't! It is not our job as it is conflict of interest.

Once again why the font size of 16 and making you sign this paperwork twice? In case you forgot it when you are handing the money to the seller.

SUNBELT MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED. SUNBELT DOES NOT DO DUE DILIGENCE ON ANY LISTINGS. PLEASE UNDERSTAND THIS IS YOUR RESPONSIBILITY TO DO YOUR OWN DUE DILIGENCE!

Our rules are do your own due diligence. If we did it for you, our professional fee would make the business price go up as someone would have to pay those fees.

When would we do it at the listing, after 3 months, after 6 months, after a year? That's why when someone is serious, they do their own due diligence.

Can't do your due diligence, please don't call us. We rather not have to go with font size of 20 on all our paperwork like we do on the heading " PLEASE BE AWARE".

On a positive note. We have helped hundreds and hundreds of buyers own a business in Thailand. We have heard of very few failures when someone bought a business. Some of them have failed but many and I mean many more positive success stories. I hope to interview 100 business buyers by the end of the year. Was talking to the owner of the radio station last night so will really try to reach this goal in the next 5 months. It should be a great series and am excited about the project. You will hear from people that decided to become business owners, what their experience has been like doing so.

Greg Lange

Managing Director

Sunbelt Asia Co., Ltd

www.sunbeltasiagroup.com

please_be_aware.doc

[eddy-ham]

I plan to relocate to Bangkok and open a F&B business as I have quite a lot of experience in this sector.

I am actually studying the local laws about taxation, patents etc....

Although I do not wish to launch a new business but rather buy an already established one.

Don't accept whats placed in from of as regards turnover, fixtures ect.From experience understand the area, compare relative business and then offer the min amount and work unpwards.

Not many people sell out of profitable business in any country.

PS I am pretty amazed at the Sunbelt reply whilst understanding their legal positon regarding sales and who they are working for I would expect that they would be able to justify accounts ect that they supply for a business sale.

[migrant]

PS I am pretty amazed at the Sunbelt reply whilst understanding their legal positon regarding sales and who they are working for I would expect that they would be able to justify accounts ect that they supply for a business sale.

I am a CPA (chartered accountant) here in the states. I do not sell businesses, but have helped many clients that buy businesses through brokers.

Sunbelt there, as many brokers here, take the owners representations, and tax returns, at face value. They mae no bones about it and that is why the many disclaimers.

I aid my clients in doing their "due diligence" by digging into the numbers, sales, bank accounts to see if the representations are true (or close).

Even the work I do can not guarantee the numbers generally, unless the client wants me to look at every piece of paper, etc.

BTW I will be moving to Thailand in 4-5 years so anyone needing some due diligence......

[eddy-ham]

I am a CPA (chartered accountant) here in the states. I do not sell businesses, but have helped many clients that buy businesses through brokers.

Sunbelt there, as many brokers here, take the owners representations, and tax returns, at face value. They mae no bones about it and that is why the many disclaimers.

I aid my clients in doing their "due diligence" by digging into the numbers, sales, bank accounts to see if the representations are true (or close).

Even the work I do can not guarantee the numbers generally, unless the client wants me to look at every piece of paper, etc.

BTW I will be moving to Thailand in 4-5 years so anyone needing some due diligence......

This is what I would expect, OK so you pay extra but as a % of the input costs its small..........

and worth while.

[Sunbelt Asia]

Not many people sell out of profitable business in any country.

I would disagree with that statement. Many businesses are for sale because of human reasons, partnership disagreements, divorce, relocation, health, tired" Do some use a human reason when selling when it is in fact losing money? Yes some people do lie while many are telling the truth. You have to delve into the business. If it wasn't this way, many people would be losing money after they buy the business. I would surmise it may be over 85+% are in business in Thailand after they bought it and are making money or breaking even. A big difference than if they started on their own. However, buy or start a business on your own, it still comes down to management

PS I am pretty amazed at the Sunbelt reply whilst understanding their legal positon regarding sales and who they are working for I would expect that they would be able to justify accounts ect that they supply for a business sale.

We have done due diligence for quite a number of clients but never if our acquisition department is involved in the business transfer. It is simple conflict of interest. If you want Sunbelt Asia to do due diligence, find a business on your own and then hire our legal and accounting team.

The CEO of Sunbelt came to our office last week and said "We are the number #1 office out of 400 offices Worldwide, as Sunbelt is the largest in the world that must make us one of the biggest in the World. We must be doing something right. Our system in Thailand is the same as all the offices Worldwide and any other competitor: Due diligence has to be done by the client.

www.sunbeltasiagroup.com

[Chang_paarp]

oh yeah me too.

finally bought a little bar in samui.

spent 2 months looking pattaya, bangkok,hua hin and other places.

look mate rule no,1 is

THEY ALL LIE TO YOU!

evry last one of them, be they a broker or an owner,

did not meet one semi-honest person.

any figures quoted to you about trading are totally fictitious.

my experience with 2 of the major brokers you see advertising everywhere

(names witheld cause i'm sure it would be censored)

is that they are very sleazy and dishonest.

so get on the ground and look long and slow.

put your own valuation on a business after seeing it every night for at least 2 weeks.

my experience is that the real value is usually about 20% of what they are asking.

be bloody careful

and good luck

You show an ignorance of buying a business that scares me. It is not like buying a car there is no consumer protection. The seller will on occasions be creative with the figures, that is why you use a team of independant professionals to help look at your investment and sort the wheat from the chaff. There are charletans out there!!!

The role of the business broker is to made the introduction and to allow the seller to continue in their business untill there is a serious buyer to speak to. They have to show a level of trust to their clients.

I ask to see the tax returns, the owner will claim they do not reflect a true picture of the business. "I am sure the tax dept would like to hear that."

Another technique I have seen in the restraunt industry is to sit behind the till and watch every thing that goes through the till. This works when you are in advanced negotiations of purchase. If you want to get an idea invest some time before you invest some money.

In the end a business is worth to you what are prepared to pay for it.

Sometimes you have to take a big breath and go with a gut instinct, other times it is an easier decision, but in the end it is your decision.

If you are not good with this risk, get a job.

[Colonel_Mustard]

oh yeah me too.

finally bought a little bar in samui.

spent 2 months looking pattaya, bangkok,hua hin and other places.

look mate rule no,1 is

THEY ALL LIE TO YOU!

evry last one of them, be they a broker or an owner,

did not meet one semi-honest person.

any figures quoted to you about trading are totally fictitious.

my experience with 2 of the major brokers you see advertising everywhere

(names witheld cause i'm sure it would be censored)

is that they are very sleazy and dishonest.

so get on the ground and look long and slow.

put your own valuation on a business after seeing it every night for at least 2 weeks.

my experience is that the real value is usually about 20% of what they are asking.

be bloody careful

and good luck

I ask to see the tax returns, the owner will claim they do not reflect a true picture of the business.

I would think that this is a fairly normal practice. I'm sure every company does whatever possible to minimize its tax liability and this would certainly not put me off buying it. However, I would want to be able to have some verification of the true profitability.

[~G~]

One can find very strange listings sometimes. For example, businesses that is offered for less than the stated yearly profit. Or businesses that are sold for "less than the assets value" - this is just contradiction in terms. Or enterprises that "require no participation of the owner", but are sold "due to relocation"...

Even if the figures can be somehow verified, they are only an indication about the past. I can imagine that owners that start to see rising competition, or changing business enviornment will try to sell based on past success (e.g. real estate broker, trying to bail out due to new regulations, showing excellent results in the past years prior to those regulations).

[Sunbelt Asia]

One can find very strange listings sometimes. For example, businesses that is offered for less than the stated yearly profit.

If a seller is very motivated it can happen that they offer at less than one times cash flow ( Owners discretionary cash after COS, rent, salaries, misc) the norm is 2-3 times. It would be a red flag to see why they are so motivated but it does happen, a good business is acquired at a this type of multiple.

businesses that are sold for "less than the assets value - this is just contradiction in terms. "

This will happen in most cases in an asset purchase as the business is losing money. Only a cash flow positive business can be evaluated by a multiple of its cash flow. If it’s negative cash flow, then the business is worth nothing in this method but of course the assets must be worth something. On average an asset purchase is 30- 50% of the asset value.

Also it can happen the cash flow is not simply high enough. The cash flow is 800,000 Baht per year. Fair market on a simple cash flow multiple is 2 million Baht but the assets for the business are 6 million. Hence on an asset basis it is worth 3 million baht max even though it is cash flow positive. You would have a business both cash flow positive and selling lower than its asset value at 3 million Baht. This has happen in a number of cases as the ROI is not 20% per year.

.

Or enterprises that "require no participation of the owner", but are sold "due to relocation"...

Yes that does happen as well A seller is not involved in the business but they are moving, they now want to sell. Some people own a business for pride of ownership and not for the money, so it can and does happen.

Some feel also a big difference if they show up out of the blue from time to time in a month, versus only once a year and there is in fact a big difference.

www.sunbeltasiagroup.com

[Colonel_Mustard]

One can find very strange listings sometimes. For example, businesses that is offered for less than the stated yearly profit. Or businesses that are sold for "less than the assets value" - this is just contradiction in terms. Or enterprises that "require no participation of the owner", but are sold "due to relocation"...

Even if the figures can be somehow verified, they are only an indication about the past. I can imagine that owners that start to see rising competition, or changing business enviornment will try to sell based on past success (e.g. real estate broker, trying to bail out due to new regulations, showing excellent results in the past years prior to those regulations).

That's all certainly true but I think one of the biggest obstacles seems to be unrealistic expectations on the part of the seller and/or buyer.

Sellers seem to often want figures that are in no way related to the actual value of the business, I've even come accross one or two that seem to want to be compensated on the amount of work that they've put in, rather than the assets or profits.

Buyers frequently think that they can buy a profitable company for a fraction of its true worth. I have a friend who is selling a profitable business for legitimate reasons. His business makes a profit of approx 5M baht per year and is continuing to grow. He told me that out of all interested parties, the best offer he received was for 5M. Now why would someone with a business that makes 5M per year sell it for that price? Would that same buyer expect 100% return per year on any other investment?

I have personally always considered that a business is worth the value of the fixed assets plus 3 times the annual net profit but that may not be the way it's normally done.

Does anyone have any idea how the selling price of a business is usually arrived at?

If both parties were more realistic in their expectations, then I guess there would be a lot fewer difficulties in buying an established business.

Edit - I see that Sunbelt answered my question while I was typing the message.

[~G~]

This will happen in most cases in an asset purchase as the business is losing money. Only a cash flow positive business can be evaluated by a multiple of its cash flow. If it’s negative cash flow, then the business is worth nothing in this method but of course the assets must be worth something. On average an asset purchase is 30- 50% of the asset value.

Also it can happen the cash flow is not simply high enough. The cash flow is 800,000 Baht per year. Fair market on a simple cash flow multiple is 2 million Baht but the assets for the business are 6 million. Hence on an asset basis it is worth 3 million baht max even though it is cash flow positive. You would have a business both cash flow positive and selling lower than its asset value at 3 million Baht. This has happen in a number of cases as the ROI is not 20% per year.

It doesn't make any sense. If the asset value is 6 million baht, and you pay 3 million to acquire the business including the asstes, you can just sell the assets for the 6 million, make an instant profit of 3 million baht and close the business. Obviously it is not possible to sell the assets at their claimed "value".

Real value? Not what the owner paid for it, but its market value today. Someone trying to sell assets for less than their "value" simply says that this "value" is completely theoretical.

[~G~]

He told me that out of all interested parties, the best offer he received was for 5M. Now why would someone with a business that makes 5M per year sell it for that price?

Because he doesn't want to run it any more and has no better offers?

[OldAsiaHand]

I know Sunbelt is a sponsor here and an honored elder, but the fact remains that their postings are professionally optimistic, sometimes laughably so. I made a similar observation here once before and was immediately lambasted by people telling me what a fine fellow Greg is.

He may well be, I don't know the guy. Regardless, it's just common sense to take anything he says with a whole box of salt. You're no more getting unbiased advice from Sunbelt than you would from any used car dealer. Remember that this man makes his living out of getting people to buy things in Thailand and, in order to do that, he gnerally paints an unreasonably upbeat picture.

[Colonel_Mustard]

He told me that out of all interested parties, the best offer he received was for 5M. Now why would someone with a business that makes 5M per year sell it for that price?

Because he doesn't want to run it any more and has no better offers?

I guess that could be true in some cases (not in this particular scenario though).

[Scenium11]

I'd like to hear feedback from people who have bought existing business.

Good and bad reports ...

[Sunbelt Asia]

[Does anyone have any idea how the selling price of a business is usually arrived at?

A good rule of thumb, sellers want three times cash flow. Buyers want to buy at 2 times cash flow and the business changes hands at 2.5 times.

This includes all equipment, goodwill, trademark, etc. The only item it don't include is real estate. liabilities or the cash in the business.

It doesn't make any sense. If the asset value is 6 million baht, and you pay 3 million to acquire the business including the asstes, you can just sell the assets for the 6 million, make an instant profit of 3 million baht and close the business. Obviously it is not possible to sell the assets at their claimed "value".

Real value? Not what the owner paid for it, but its market value today. Someone trying to sell assets for less than their "value" simply says that this "value" is completely theoretical.

The asset value is what it cost to replace the equipment, leasehold equipment. The buyer is getting this all for free and in Thailand, most sellers will include the inventory in the selling price as well.

If you are looking to buy a business that is not generating a high enough profit, the norm is to pay 50% of the replacement value. A seller would love to get the replacement value even though he has worked his butt off. He has to be prepared to lose half of his investment or more.

I'd like to hear feedback from people who have bought existing business.

Good and bad reports ...

Here are three with many more to come...

Bar 21

Asian Golf

Nana Minimart

He may well be, I don't know the guy. Regardless, it's just common sense to take anything he says with a whole box of salt. You're no more getting unbiased advice from Sunbelt than you would from any used car dealer. Remember that this man makes his living out of getting people to buy things in Thailand and, in order to do that, he gnerally paints an unreasonably upbeat picture.

I live by the motto to "respect others and treat them in the way that we want to be treated".

That is our Core Value along with others Values which reflect our organization's cultural values and govern our day-to-day decisions and behavior. We expect our employees and other Sunbelt Asia offices to adhere to these Core Values.

Integrity – We revere honesty and forthrightness. We adhere to the highest ethical standards, provide timely, accurate and complete financial reporting, encourage prompt disclosure of bad news and welcome disagreement.

Objectives – We clearly state and share our objectives with our employees, shareholders and others. We measure our performance against these objectives and react to new information, changes and opportunities by adjusting our business processes to achieve and surpass our objectives.

Excellence – We are committed to continuously improving our performance in order to meet and exceed the expectations of our clients. We reward our people for improving service quality and reducing costs.

Profit – Earning a profit rewards our investors and enables us to attract necessary capital for further investment in our people and operating processes.

I strongly feel we have done our utmost to live up to these standards.

A person is not buying Sunbelt they are buying a business. I have never ever called a client back to ask them how they like a business after they went and saw it . I myself have never ever once pursuaded them to buy a business. The client has to call me to tell me he wants to put a offer to purchase in. I then am able to advise them how to protect themselves. To compare me to a used car salesman, think if I ever went in the business I would starve to death cause I'm the worse salesman on planet earth. Our job is to give information and solve problems on the business transfer. Selling... LOl that is a new one in our organization.

Don't know of one car dealer that before they take the client to see a car in the car lot, has them sign a A-4 paper with a skull and crossbones with bold print screaming danger " take everything you hear with a grain of salt. You need to check everything out " Any one know a so called car salesman that has ever done that?

www.sunbeltasiagroup.com

[~G~]

Here are three with many more to come...

Great interviews, Greg, however, I am not sure he was looking for feedbacks played in a Sunbelt-sponsored radio station (and please correct me if I'm wrong), with the MD of Sunbelt as the interviewer... Without doubting Sunbelt, when one comes to asses a company one needs to get feedback from sources a bit less dependent on, or affiliated with, that company...

[Sunbelt Asia]

Here are three with many more to come...

Great interviews, Greg, however, I am not sure he was looking for feedbacks played in a Sunbelt-sponsored radio station (and please correct me if I'm wrong), with the MD of Sunbelt as the interviewer... Without doubting Sunbelt, when one comes to asses a company one needs to get feedback from sources a bit less dependent on, or affiliated with, that company...

Thanks G. I know what you mean but most people that bought a business are not TV members. Or if they were, they don't come on and check threads. Why should they? They know everything now on work permits and visas, etc.

If I called up the last 100 or so clients that bought a business. I'm sure most would be happy to do so but it would be new members of TV and then we be called"stuffing the vote box on buying a business"

To be frank, even though the interviews were done by me. I think the people gave honest answers and that came through in the interview. For instance the owner of Nana Minimart interview, most were surprised that a Thai would have the same problems as a foreigner getting started in Thailand. A number of people have commented on that.

I enjoyed doing those interviews and will be doing a whole series soon.

www.sunbeltasiagroup.com

[Expat2B]

The asset value is what it cost to replace the equipment, leasehold equipment. The buyer is getting this all for free and in Thailand, most sellers will include the inventory in the selling price as well.

If you are looking to buy a business that is not generating a high enough profit, the norm is to pay 50% of the replacement value. A seller would love to get the replacement value even though he has worked his butt off. He has to be prepared to lose half of his investment or more.

This is the biggest load of nonsense I have ever read. the "value" of fixed assets is what they are worth not the replacement cost. By this measure the "value" of a 3 year old BKK taxi cab is the price of a new car. This is just so self evidently BS. The value of a piece of equipment etc etc. is its realisable price on the market and not its replacement cost.

[soic]

Well... I will be meeting with Sunbelt when I get to BKK. I already have my businesses, houses and car. I'll be trying to undo so of the damage that I may have done to myself by not going sooner. I put everything and I mean everything in my fiance's name. I don't worry about her motives in the slightest, she and I have been together for 3 years and she isn't one of those young cutie gold diggers, she a very beautiful, settled 40 year old. I only do this to make sure that I don't lose everything if something, God forbid, ever happens to her. Sunbelt is going to help me get my company going and get the assets into the company name so that I won't have to live my life on trust alone. I'll let you know how it goes, but I'm very optimistic, they've been very forthcoming and have told me the limitations and obligations, they've provided much of the documentation about their services and haven't been putting on the "hard" sell.

The business that I worry about always and I mean always paint a sunshine and roses picture. Sunbelt throws in a dose of reality. We've been talking for more than a year, I've just been dragging my feet. Now it's time to do something.

[Sunbelt Asia]

The asset value is what it cost to replace the equipment, leasehold equipment. The buyer is getting this all for free and in Thailand, most sellers will include the inventory in the selling price as well.

If you are looking to buy a business that is not generating a high enough profit, the norm is to pay 50% of the replacement value. A seller would love to get the replacement value even though he has worked his butt off. He has to be prepared to lose half of his investment or more.

This is the biggest load of nonsense I have ever read. the "value" of fixed assets is what they are worth not the replacement cost. By this measure the "value" of a 3 year old BKK taxi cab is the price of a new car. This is just so self evidently BS. The value of a piece of equipment etc etc. is its realisable price on the market and not its replacement cost.

You missed a step.

This value is a simple starting point. When you value a business assets you have to start from the same point. The reason it has to be done from this point is because leasehold improvements make up a certain portion of this value. If you value what it is worth now, it is zero for the leasehold improvements as the landlord keeps this when the owner moves out but it has a value to the buyer who will be using the leasehold improvements when he acquires the business.

Otherwise a brand new restaurant the day it open would go from 6 million to 2 million in value and of course most would not value it at 2 million that first day. The owner certainly wouldn't after he pulled his hair out 5,000 times in the past 120 days getting ready for the opening. He would want at least 2 million Baht more for his hair.

If it is a cash flow model, you are getting the assets for free. The assets are included in the acquisition price. However most buyers would like to know what the seller paid for them and can prove that. This includes the leasehold improvements. You want to know the fair market value, go 30-50% this value as a rule of thumb.

Example: A business has assets( non real estate) that cost the seller 6 million. They could be worth 1.8 million to 3 million Baht. but it does not matter as the cost to you would be zero. The business makes 2 million a year and has a rule of thumb value of 5 million Baht. No additional price increase should be added for the assets as the assets were how the seller obtained the cash flow.

If it is a asset value model. You take 30-50% of this replacement value to determine the fair market selling price.

Example: The business has assets that cost the seller 10 million. It is breaking even. The business could be worth 3 million to 5 million Baht.

www.sunbeltasiagroup.com

[Expat2B]

The asset value is what it cost to replace the equipment, leasehold equipment. The buyer is getting this all for free and in Thailand, most sellers will include the inventory in the selling price as well.

If you are looking to buy a business that is not generating a high enough profit, the norm is to pay 50% of the replacement value. A seller would love to get the replacement value even though he has worked his butt off. He has to be prepared to lose half of his investment or more.

This is the biggest load of nonsense I have ever read. the "value" of fixed assets is what they are worth not the replacement cost. By this measure the "value" of a 3 year old BKK taxi cab is the price of a new car. This is just so self evidently BS. The value of a piece of equipment etc etc. is its realisable price on the market and not its replacement cost.

You missed a step.

This value is a simple starting point. When you value a business assets you have to start from the same point. The reason it has to be done from this point is because leasehold improvements make up a certain portion of this value. If you value what it is worth now, it is zero for the leasehold improvements as the landlord keeps this when the owner moves out but it has a value to the buyer who will be using the leasehold improvements when he acquires the business.

Otherwise a brand new restaurant the day it open would go from 6 million to 2 million in value and of course most would not value it at 2 million that first day. The owner certainly wouldn't after he pulled his hair out 5,000 times in the past 120 days getting ready for the opening. He would want at least 2 million Baht more for his hair.

If it is a cash flow model, you are getting the assets for free. The assets are included in the acquisition price. However most buyers would like to know what the seller paid for them and can prove that. This includes the leasehold improvements. You want to know the fair market value, go 30-50% this value as a rule of thumb.

Example: A business has assets( non real estate) that cost the seller 6 million. They could be worth 1.8 million to 3 million Baht. but it does not matter as the cost to you would be zero. The business makes 2 million a year and has a rule of thumb value of 5 million Baht. No additional price increase should be added for the assets as the assets were how the seller obtained the cash flow.

If it is a asset value model. You take 30-50% of this replacement value to determine the fair market selling price.

Example: The business has assets that cost the seller 10 million. It is breaking even. The business could be worth 3 million to 5 million Baht.

www.sunbeltasiagroup.com

The business is worth only what a buyer is prepared to pay, the reality is no more complicated than that. A buyer can (for example) set an asking price and a minimum acceptable offer price, but neither of these figures are values. Leasehold improvements once made become a sunk cost in the business and I would not expect them to be recovered except in respect of any additional profitability they brought to that business.

In your example the restaurant owner that had spent B6M on opening his business would still have a business that was worth zero as a starting point IMHO until he had demonstrated that the business was capable of generating profit in at least the medium term. Of course you will not agree with this, since if you did many of the businesses on your books would be clearly worthless (which IMHO is correct).

My starting point in valuing a business which was breaking even only would be an assumption of zero value. If buying this business allowed me perhaps to take out a competitor then buying that business adds value to my own and thus I would perhaps value the increased profitablity I would accrue as a result of the acquisition. If I was a new entrant to the market I might look at those costs I may avoid in setting up from scratch and value on this basis. In any scenario I would consider a reduction in any valuation I arrived at to reflect my perception of the the accuracy of the financial information I had received (and where possible been able to verify).

Fundamentally any "valuation" mechanism is used merely to assist the vendor/purchaser negotiation process and to de-personalise negotiations. The valuation of a business is rarely a simple "scientific" exercise unless the sale is one of tangible business assets only. The vendor (or his agent) will try to justify his sale price by reference to "objective" formula or pricing models, the purchaser (or his agent) will use a similar basis to support a lower price. The 2 parties will either eventually come to an agreement or they will not, one thing is certain however no model or formula exists for accurately and objectively valuing a business which will satisfy all parties.

[Sunbelt Asia]

The 2 parties will either eventually come to an agreement or they will not, one thing is certain however no model or formula exists for accurately and objectively valuing a business which will satisfy all parties.

Over 100 different methods to evaluate a business and I have over 60 different books on the subject. You’ll find no magic wand, it just come down to want the buyer and seller agree upon. You like to have controversy, put 10 people in a room and ask them what a business is worth, stand back and watch the fireworks.

I have a business advisor in our Bangkok office, who has been one for the last 28 years (By the way he is 79 years old) and I myself have been in the business transfer industry for close to 25 years (going on 5 years in Thailand) and we have found the cash flow multiple to be the most consistent but of course it is not the magic wand either.

www.sunbeltasiagroup.com