To help you value a business – you need to consider the financial information the seller will give, this is a real case study of a Hair/Beauty business that I was asked to look at – and the reply given:
it tends to be easier to see the business owner – I would want the below info:
Loyalty Customers – how many and the frequency of their re-purchases Location of premises Groupon – The offer and how many re-purchase without the discounts Mercedes Vehicle – is that included in the purchase Director – Are they based at the business and how many hours do they work each week (operational with treatments) On VAT return Cash was only banked 3 times for just under 3k – an idea of cash sales Xero – draft shows net profits – yet submitted accounts show losses Mobile Phones included in business Staff turnover if any Machinery used – outdated ? and technologies and what competitors use Directors Loan Account – and money introduced (xxxxxxx Ltd) Inventory shows Initial Software License – is this inventory Rent and Rates have increased – agreement and terms required Amazon sales revenue – detail Product Sales – if any
I would guess that the director is operational – if so you would need to salary a person to take over that position, along with the old stock/machinery I am sure they are harder to re market especially with new tech and trends that come into the industry – the first set of accounts were filed late – this is never a good sign – also this is a mature market and competition is tough – and the capital intensity shouldn’t be as high as this business has done – also on products, the economies of scale are not in favor compared to the web and larger players – the sales have been static for a few years which is never good –
My valuation on a business with losses and static sales – zero.
My valuation on the business if it can be turned around would mean having a meeting and trying to understand more.