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Looking for some pointers in how to go about valuing a small, jointly owned Limited business - one partner is amicably leaving a very healthy business and need guidance on how to place a fair value. If anyone has any experience or pointers, that'd be much appreciated.
Cheers
I've watched Dragon's Den - £3.50 for a 40% share and that's cutting my own throat.
Hi - It will depend on the industry and the financial performance (historic and projected). Generally businesses are valued on a multiple of EBITDA. Email in profile
howarthp - PM sent
7 x EBITDA - 4x Free cash flow + 2x Goodwill - 0.675 * outstanding share capital +0.21 * last years VAT return
Then divide by the first number that comes into your head and take the square root of that.
Then convert into guineas and you'll be close.
I did some mergers and acquistion work a few years ago - as a starting point, it's usually multiple of annual earnings (EBITA) and would increase depending on whether it's an established business with lots of repeat business, longer-term earnings potential plus any cash, assets, goodwill + intangibles. Ultimately, it can just come down to a number and whether you can both come to a mutual agreement - like Dragon's Den, most people are wildly optimistic on their business value. Get an independent accountant to examine the accounts and provide a valuation.
If you get on well and trust each other to be fair then this is what I'd do.
The partner leaving should write down the minimum price they would accept and the remaining partner write down the maximum price they would offer.
Reveal them at the same time and if the minimum price is lower than the maximum price then the value is the average of the two figures and both partners will be equally as happy.
If the minimum price is higher than the maximum price then do some of that more complicated stuff in posts above.