Serious Question - Business Value

[Montezuma]

Originally posted by Steve
If the business is in California,  it is basically worhtless so whatever you got for it is good.  Unless Grey Davis is thwarted, CA businesses are going to be in greatly devalued due to their tax burdens.

Wow!  You mean that Chevron/Texaco, Intel, Northrop Grumman, Oracle and all the rest are going to be worthless?

[midnight Target]

Debt is semi irrelevent... its all about cash flow.

[Rude]

Originally posted by midnight Target
Debt is semi irrelevent... its all about cash flow.

Please define semi-irrelevant.

[midnight Target]

As in "a debt free company". This means nothing if the cash flow isn't on the positive side. While some debt is OK as long as cash flow is good.
That is all.

[Badger]

Hard to sell as it's a lifestyle business........

Assuming LTM EBITDA is normalized and forecasts for next 3 years would hold, then $600,000 maximum .....

To get that, you may have to take a mixture of cash with the balance in the form of a VTB.........

If offered all cash, take 450,000 and run........

Just my two cents.......

Regards,
Badger

BTW, do you have a "shotgun" clause in your shareholder or partner's agreement?

[Habu]

I took 550,000 for my half. But I financed 400,000 over 5 years with 5% interest partly secured by the guys house.

The only reason I made the deal that low is I get all of it (except the interest) tax free.

I am free to start another business anywhere except within 1.5 km of the existing one.

It really is a big cash generator but the guy was starting to dip into the till so I had to end the partnership.

[Badger]

Originally posted by Habu
I took 550,000 for my half. But I financed 400,000 over 5 years with 5% interest partly secured by the guys house.

$150,000 Cash with a $400,000 (5x5) VTB for a half cash-out owner/operated lifestyle retail garden business with the rough fiscal normalized numbers you mentioned, IMHO is a fair exchange of values.

You NC is reasonable and the only thing you really need to ensure is that the security on your VTB is solid and enforceable quickly, particularly if he drives the business "sideways", which sounds like it may be a possibility if he's exhibiting stick fingers right now.  Again, the key to your deal being fair is getting a tight legal VTB signed off and registered.  Besides his personal assets (ie: house ... in his name I assume and not a relative?), you might even want to get the right to re-assume the business assets if payments fall in arrears by a certain amount.

Congratulations and good luck......

Regards,
Badger

[Habu]

I had a firm that specializes in Bankrupcy cases write up the security portion of the deal. All of the points you made are in the agreement. If he defaults I not only get my shares back but his as well. But the shares would be worthless as if he defaults then the business is probably in big trouble. But I also have a personal guarentee as well as the pledge of assets.

In any case it would take 2 or 3 years to run it into the ground (now that I am not controlling the cash that is a possibility) but at least by then I would have taken most of my money out.

The other reason I considered when selling is that we only started the place up 3 years ago, and it is a sideline from my wholesale business.

[Curval]

Habu,

You clearly didn't sell yourself short.

The figures I gave you were for the value of the entire company.  If the other partner already owned half the business the figures I gave you (1 million plus the balance sheet items) is the TOTAL value of the business selling to a third party.  You would need to divide that by two to determine what your half would be worth.

[Sikboy]

Originally posted by Rude
Please define semi-irrelevant.

It's when the freight hits San Pedro, on it's way to Japan.

-Sik