How would you value an existing business?

[USMC1911]

Thanks, but maybe in 5 or so years.
Next question for those more savvy about these things than me. Would a trade for property keep the tax man out of my pocket? My thought is if I take a cash out I have to pay capitol gains tax but if there is no cash gain like a straight across trade then I shouldn't have to take the big hit.

I would definitely get the advice of a tax professional on that end. I am sure there are significant thresholds or ways it is structured that make or break that kind of deal tax wise.

 

[Helocat]

Thanks, but maybe in 5 or so years.
Next question for those more savvy about these things than me. Would a trade for property keep the tax man out of my pocket? My thought is if I take a cash out I have to pay capitol gains tax but if there is no cash gain like a straight across trade then I shouldn't have to take the big hit.

I would definitely get the advice of a tax professional on that end. I am sure there are significant thresholds or ways it is structured that make or break that kind of deal tax wise.

Beat me too it! I was just going to say, spend the $ to talk with a good accountant.

There are ways to spread out the hit. Have the new owner pay across multiple years so your spread the hit. Drawback is the buyer could run it into the ground and 2yrs later not have that 3yrd yr payment and you have limited value of the biz to repo. One might consider doing "2" payments then late Dec. One in Dec. the other in January, kind of a way to get it spread over two yrs taxes but essentially get your funds up front.

 

[oremike]

I'll certainly get accountant and lawered up before making any deal. I want a one and done deal because I got burned when I sold my Scrap Metal business on the payment plan. My buyer missed a couple payments and when I investigated I found out he'd been busted for a grow in the shop so I didn't want to claim any interest in what was going on.

 

[dinky450]

Usually it is gross profits times 4 is a good rule of thumb. I just got my company evaluated and used a business financial advisor. Most times assets don't play a big part just proven sales. Best way for you is sell the company as a whole for tax reasons but most will want to buy as a asset sell so they get the tax breaks later.

 

[Unicykle]

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.

In a few minor instances your employer might be correct, but rarely. What would it cost you to set that business up licensing insurance regulations tools supplies materials and the location. What's a persons time worth to find customers up set up long-term accounts get the website up and running and functioning get your payment options get your shipping in place. To me an running business where you can unlock the doors at 9 o'clock and start making and selling product has a value .

 

[solv3nt]

In a few minor instances your employer might be correct, but rarely. What would it cost you to set that business up licensing insurance regulations tools supplies materials and the location. What's a persons time worth to find customers up set up long-term accounts get the website up and running and functioning get your payment options get your shipping in place. To me an running business where you can unlock the doors at 9 o'clock and start making and selling product has a value .

Engineering is one of those that have no value, and I'm sure there's other fields that are similar. Am owner of a small engineering firm can only hope they can convince people within the company to buy them out, offer stock, or hope for a bigger company to buy them earlier on.

 

[dangerranger60]

Thanks, but maybe in 5 or so years.
Next question for those more savvy about these things than me. Would a trade for property keep the tax man out of my pocket? My thought is if I take a cash out I have to pay capitol gains tax but if there is no cash gain like a straight across trade then I shouldn't have to take the big hit.

That would be a question for a tax lawyer.^
When I sold my bullet casting business, I put a value on the equip, records, and materials on hand. I put a separate value on finished stock of bullets, and another on the business itself.
When it sold it went to an out of state buyer who was not interested in the name , phone numbers, or past clients.
Had I sold it as a business That would have included about a years income over a couple years. And a time of transition where I stayed on . I will say this, retiring is the best thing I have ever done. But I still run a small business that will pay me to travel the western states. It just does not require any heavy lifting or more time that a couple weekends a month. Good Luck, DR