How would you value an existing business?

[oremike]

First off I'm not looking to get out of the ammo business at least not yet. That being said, I am 66 and my wife can retire in another 6 years so we might want to do some traveling/snowbirding or whatever rather than run an ammo business. So how to value all this? I'd want to keep a few guns the I like but quite a few are just test fixtures I use in my business. Then there is the equipment and supplies. All of that stuff is easy more or less to figure out he fair market value of but how to value the business itself? Name, reputation, suppliers, customers, pet load data and other non tangibles like licenses and insurance all have value so how do I determine what that is worth? I know when the time comes I can just shut the doors and "go out of business" but I've put a lot of energy in to this and would like to see it continue beyond me so selling as a turn key business is attractive.

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[joken]

I asked the same question to an employer years ago and he said that it had no value because the business would available for free if there was a demand after it closed. I don't necessarily agree with his opinion but it's something I always remembered.

 

[2506]

Start here:

Valuing a Company: Business Valuation Defined With 6 Methods

Business valuation is the process of estimating the value of a business or company.

www.investopedia.com

 

[MTpockets]

Here is a link with decent information...

How to Value a Business: The Ultimate Guide

Read our three steps to determine the value of a business based on your industry, current sales, and current profit.

fitsmallbusiness.com

Here is a link to an ammunition manufacturing business that is for sale. Searchable for comparison.

Ammunition Manufacturing Company in Maricopa County, Arizona - BizBuySell

Maricopa County, AZ:Turnkey, fully functional ammunition manufacturing company with single-shift production capability of 250,000 daily rounds. Experienced operator and

www.bizbuysell.com

Edit to add... I don't know the capabilities of your business, but you may want to look into government contracts for frangible and/or training ammunition.Those contracts, if profitable, can be major valuation boosters...even after the contracts have been fulfilled.

Edit to add 2: Documentation...Past, Present and Projected. Investing a little time in documenting your Business Plan, in a projection, will provide more than the written information.

 

[oremike]

Start here:

Valuing a Company: Business Valuation Defined With 6 Methods

Business valuation is the process of estimating the value of a business or company.

www.investopedia.com

interesting, thank you.

 

[Longwalkhome]

A man buying a small business is buying a job, he wants to work for himself. The value of the business will depend greatly on what the buyer can earn when he buys it.

 

[oremike]

In reading the provided links my guess would be the value of assets, plus proven earning potential over a given time period would be a good ball park place to start. Interesting to think about the real world numbers, I've amassed most of this over the years and just been trudging the road of happy destiny.

 

[Snip]

The benchmark that I've always heard was 1 year of sales. There may be multiples attached to that if there is a new product or if business is booming. But it gets down to what someone would pay, and that's not necessarily calculable.

 

[User 1234]

Also keep in mind that most buyers will not receive your existing licenses and registrations because they'll do an asset purchase not a stock purchase (assuming you have an entity not a sole prop). They could buy the name if you can prove the name has value. Buyers want to avoid successor liability.

 

[Longwalkhome]

Best example i can give is S&M gunshop on River road in Eugene.

Marvin worked decades building a great gunshop with a huge clientele, he really knew guns and the business. He got old and sold out slowly by bringing in the new owner and working with him or them to make sure they got what they paid for.

I have been there several times since he sold out, great business last time I was there.

 

[oremike]

Also keep in mind that most buyers will not receive your existing licenses and registrations because they'll do an asset purchase not a stock purchase (assuming you have an entity not a sole prop). They could buy the name if you can prove the name has value. Buyers want to avoid successor liability.

I get all that. What got me thinking more about this stuff was I had a customer ask what it would take to buy my business so I shot him a totally random number as a land swap. Turns out he wanted ownership but to have me manage it for him. That was a hard no from me.

 

[oremike]

Best example i can give is S&M gunshop on River road in Eugene.

Marvin worked decades building a great gunshop with a huge clientele, he really knew guns and the business. He got old and sold out slowly by bringing in the new owner and working with him or them to make sure they got what they paid for.

I have been there several times since he sold out, great business last time I was there.

I thought S&M was a Pot Shop these days. That's who Starvin' Marvin sold out to.

 

[User 1234]

I get all that. What got me thinking more about this stuff was I had a customer ask what it would take to buy my business so I shot him a totally random number as a land swap. Turns out he wanted ownership but to have me manage it for him. That was a hard no from me.

Then why say this: "… and other non tangibles like licenses and insurance all have value…". ? I'm just trying to be helpful.

 

[oremike]

Then why say this: "… and other non tangibles like licenses and insurance all have value…". ? I'm just trying to be helpful.

Well because in my mind they do have value and are transferable. I own the business name, FFL, insurance policy, Website, ect. All could be part of a sale or not depending on the deal.

 

[User 1234]

Well because in my mind they do have value and are transferable. I own the business name, FFL, insurance policy, Website, ect. All could be part of a sale or not depending on the deal.

Then I don't think my message was clear. Federal firearm licenses are not transferrable. Unless you convince a buyer to buy your existing entity's stock then the buyer will need to apply for a new license for the buying entity.

 

[Longwalkhome]

I thought S&M was a Pot Shop these days. That's who Starvin' Marvin sold out to.

Might be a pot shop now but it used to be the best gunshop in Eugene when Marvin run it. A bing search on the net shows its still a gunshop

 

[oremike]

Thank you for the clarification, if they buy the company, name included, they can operate under my (the businesses) FFL until it expires. if they want to change the name then they need a different FFL right out of the gate. At least that's how I read what you've cut and pasted.

 

[oremike]

Might be a pot shop now but it used to be the best gunshop in Eugene when Marvin run it. A bing search on the net shows its still a gunshop

You must have been going to a different S&M Guns shop than me or a whole lot of reviewers went to. Last time I saw Marvin it was at the Willamette valley arms collector show a couple years ago. I asked him if he was going to paint the building yellow and call it Marvins Garden. He didn't get the Monopoly reference.

 

[Longwalkhome]

You must have been going to a different S&M Guns shop than me or a whole lot of reviewers went to. Last time I saw Marvin it was at the Willamette valley arms collector show a couple years ago. I asked him if he was going to paint the building yellow and call it Marvins Garden. He didn't get the Monopoly reference.

Years ago Marvin sold me my first Glock, before glocks were cool. He knew his guns and could sell them to ya, tore it apart and put it together just slick as pudding. He told me when he ran his shop that he didn't like gun shows because they compete with him selling guns. I liked him and his dog, some folks didn't.

 

[Dust2Dollars]

There is no LINK that can be posted here that has the correct formula to evaluate a business.

Another thing, apples and orange, yes apples and oranges rolling around.

My thoughts are there is nothing of value of a reloading business except to the inventory and equipment. Why? Those are the only two components you need to start and operate the business.

With the component prices and shortages all I see is a difficult road on a venture like this.