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Just for discussion, business is mostly about the economy but what destroys them is over regulations by governments.
114 goes through and I believe it will really hurt gunshops. The election goes wrong and gunshops will be constantly hurt more. Inflation is going to kill small businesses, government is destroying them.
What's a small business worth as the economy crashes?
Maybe I'm missing something, but this sounds exactly like what you're asking for…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.
I'd done a bunch of business with Marvin over the years. To say it was the best gun shop in Eugene is a bit of a stretch IMHO. Sometimes I'd walk out with my purchase, other times I'd just walk out shaking my head. It was fun to wind him up by telling him that you'd seen a gun he had for less at some other store and try to get him to beat that price. It was like you were taking food from his kids mouths, hence the nick name Starvin' Marvin.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.
The value of the equipment and inventory is the easy part. The "blue sky" part, value of the name, customer base etc. is the hard part. Value over hard. assets is directly related to how profitable your company is on the P&L. This gets hard for allot of small bis as they run their company to not show a lot of profit due to tax reasons. BUT the mindset of building a profitable (thus valuable) business is key and paid taxes, well that's part of showing the value. The number for the value is somewhere in what your actual profit is. This is where the formula of EBITDA comes in to help. Earnings before Interest, Taxes, Depreciation, and Amortisation. Just google EBITDA lots of articles and examples out there.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.
He wanted the investment idea, with you as the EE. That can actually work as a way to transfer ownership. He owns it you work it for set number of months 3-24 whatever, then it's his to run or pay someone to run it for him once your out.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.
This. A small business valuation would start at the one year sales and go down from there for a one man shop.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.
I rate a gunshop in a lot of ways, Marvin always gave good customer service and knew what he was talking about. It was his place with his name on it and he cared about his name. Yet he could take a joke when folks called him "Starvin Marvin". He watched his money pretty close and I never tried to talk him down on price. If I wanted teeth pulled with pliers I would go to the dentist and listening to him talk prices to others told me no thanks.I'd done a bunch of business with Marvin over the years. To say it was the best gun shop in Eugene is a bit of a stretch IMHO. Sometimes I'd walk out with my purchase, other times I'd just walk out shaking my head. It was fun to wind him up by telling him that you'd seen a gun he had for less at some other store and try to get him to beat that price. It was like you were taking food from his kids mouths, hence the nick name Starvin' Marvin.
Where the business is owned by and depends on the creativity of one person, there is nothing to sell. The creative owner IS the business. Thats true even if the overall type of business were not dwindling.Specialty businesses might have special considerations. In this case, the future of ammo sales might become cloudy. Taking California as an example. Lead bullet ban, background checks for purchases, etc. Eventually heavy-handed government might discourage gun hobby activity severely. We can't know how far this will go.
Politics can change markets. So can technology. A sister-in-law has an established, one person business creating crossword puzzles. She set up a syndicate that markets to many US newspapers. However, we all know the situation with print journalism in the cyber age, it's a downward spiral. This situation being the case, her business that she once wished to sell and retire from becomes less salable by the year. Because finding a buyer becomes more and more challenging, she has trapped herself into working longer. Not because she can't do without the income, but because she can't stomach not getting anything out of her business when she gives it up!
If you were right, I'd agree with you. But if OP has a "brand", a client list, any trade secrets, those all have value even though the business is small enough to be operated by one person. (I noticed that client lists of a one-man business drop by about half after the sale.)Where the business is owned by and depends on the creativity of one person, there is nothing to sell. The creative owner IS the business. Thats true even if the overall type of business were not dwindling.
@oremike meet your buyer.If you were right, I'd agree with you. But if OP has a "brand", a client list, any trade secrets, those all have value even though the business is small enough to be operated by one person. (I noticed that client lists of a one-man business drop by about half after the sale.)
I've bought a few small businesses, but they were usually turnarounds that I bought for asset value or less. If a business has a bad reputation, there is no value to the business name and it should be changed, so a buyer is kind of starting from scratch. If the name has a good reputation, it has some value and should be maintained and probably paid for.
When I bought a business I wanted a two-year payback on any "blue sky"--anything besides the hard assets. And when I sold them, that's how I valued them: tangible assets, reasonably priced, plus two years gross income (revenue minus cost of goods).
Thanks, but maybe in 5 or so years.@oremike meet your buyer.