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My wife set up a small business selling preserves over the past year. It hasn’t generated the profits she was hoping for and she can’t see how it will unless she goes really big to cut costs which isn’t the reason she did it. Therefore she has decided to close the business. She has announced this on her Instagram and has since been approached by two people interested in buying the business. We are trying to clarify what they are expecting to buy but essentially it is grouped into two items:
1. The business name, logo, Instagram account, labels and recipes (the intellectual property).
2. The manufacturing equipment (in reality this is pretty small and worth less than £100)
How do we value the IP? The set up costs for this were around £500 at a guess maybe a bit more. We now have no idea how to value it as we didn’t think people would be interested in the brand.
Ask each of the two interested parties to make you an offer?
It's worth whatever someone is prepared to pay for it.
As above.
It's worthless to her now (she was just going to shut it). Have a minimum you'd be prepared to accept, ask them for an offer, try to haggle them up a bit or play them off against each other.
I'm surprised there's any value in the recipes (though you have to assume they've tried them and think using them will save them time in experimentation). They must think the labels/brand/web address etc are good enough that they have some benefit over starting from scratch
Post tax profit, multiply by 4.
Give them all the IP and equipment in return on a contractual basis for 25% of post-tax profit per annum paid on audited accounts within 90 days of the end of the tax year. #nothingtolose
Dont bother trying to work it out with a formula. It's worth exactly what someone wants to offer you for it.
I've spent 30 years in finance and can tell you a valuation is like a block of flats - one man's floor is another man's ceiling.
Cheers for the replies. She has drafted a email to them detailing what is for sale and will see how it plays out. Will up date you!