I am in the middle of filling out (late) a FAFSA application for my daughters college financial aid. One of the questions is what is my business worth. I am a one man show, addition and remodeling company. I have been in business for over 20 years. Other than my ’87 GMC and tools I don’t see any value. I can’t imagine that my business has any commercial value.
Has anyone else been through this already and did a low value create any problems. I’m thinking that $5,000.00 to $8,000.00 is what the tangibles are worth. But beyond that is there any value.
Replies
Never really thought about it ,but now that you mention it, I guess it would be worth what it would take to start over, If , say , you lost it all in a fire.
The cost of tools, trucks, equiptment, office stuff, stationary, insurance, ect.
then how do you put a price on client base and reputation?
I guess it would be worth what someone would be willing to pay for it if you put it up for sale. But I don't think I could get a dime for it on the open market since any one could build it up from scratch just like I did.
it was explained to me once how "they" price an existing business.
appearantly there are people who do such things.
everything Jay mentioned .. all the assets ... then ... X amount of dollars for X amount of years that you've pulled in X amount of work ... then somehow subtract yourself from the picture in terms of dollars and cents because since it's your business ... you've brought some worth to it over the years.
number of customers .. size of past jobs ... number of repeat customers ... all lends itself to the vaule of the business.
Bet Sonny can come in and straighten us all out.
Then again ... financial aid forms ... U want "low" right?
Jeff
This is a great question. It's hard to figure. I know a man here who owns a carpet and tile business who wanted to sell the business about 8 or 10 yrs back. He had a nice store probably worth about 700k at the time. Office equipment, furnishigs, computers, copiers, phone system, 3 trucks, and the samples and small inventory inside the store were worth about 200k. His asking price was 1.5 million. This was a well established business of about 35 yrs with 'his name' having a sterling reputation in his business. The business name was " 'his name' Floor Covering".
What struck me about this offer was that once you take ' his name' out of the business, you would be loosing the most valuable asset the business had. What is there to buy in a service industry business but tangibles? On a large scale there may be contracts and so forth that would be worth something but that isn't the norm.
If I wanted to get in the carpet and tile business, I wouldn't pay 1.5 million for his. I would build or lease my own store, buy what I needed to run it and save 7 to 800k.
If its for FAFSA then your business is worth nothing, zilch, zero. Why? The more you make or are worth the less FAFSA will help. Take it from a father who go no help from them! Get what you can. DanT
I just do it as a cash market value of the vehicles and tools at current market.
But I do the same valuation for them, for the tax m,an, and for the collateral at the bank. There is a temptation to over-inflate values at the bank, and to undervalye for the tax guy. Topgether they strike a god balance in keeping my figures honest.
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I thought it was acceptable business practice to keep one set of books for the tax guy and others who you want to appear undervalued to, and another set of books for investors and those you want to appear fully valued to. No?
Mike
I've always understood that you're in the best shape if you keep two sets of books.As long as you follow GAAP for both and are consistent, how could that be misleading?
Jon Blakemore
Equipment plus one years net before taxes.
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I'm willing to bet that most in here are about the same.
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I believe the're asking for the Net Worth (Assets - Liabilities). Just remember the more you make the less financial aid your daughter will have access to. So make sure you account for depreciation as you determine your assets.
Your accountant should be able to make a recommendation, which would include the value of what is referred to as "goodwill." Business valuation includes more than simple net worth - the "goodwill" of the name in the community (or not) has a direct impact on the value. This valuation would be similar to what would be done in a divorce settlement by an accountant, possibly a forensic accountant.
For financial aid I would think an independent evaluation (not the business owner's opinion) would be required.
To me it is only worth something if someone is willing to buy it. If there is no buyer their is no worth.
Besides the truck and tools the only thing that i feel that I would have to sell is a list of past clients and my phone number.
But how could a solid or semi solid # be attached to those things. My business name is my personal name and i would not sell that because I would not want my name attached to something that I would have no control over.
When a past customer calls or a referall they are looking for me. I would imagine that a new guy who took over my phone # would at best get 50% of the jobs that i would normally land and I think that is being optomistic.
So who would pay anything for that.
It's not like a storefront with traffic. There is no guaranteed clientel.
When a past customer calls or a referall they are looking for me.
That's why you can honestly conclude that your business has no value beyond the truck and tools.
I'm with DanT. Since you're trying to qualify your daughter for whatever assistance is out there, low-ball the numbers. $ 5,000 or so. But if you were trying to borrow operating capital for the business, I'd use 5 times last years earnings. That's pretty standard in the business world.
Your name, reputation, good-will, it's all worth intangible dollars. You ability to make a living has a price, too.
Greg
We have lost two partners in the course of our partnership and added two others. In all these cases we had to value our business. We simply used the book value of the business at the time of the changes. Assets-liabilities. In one case we kicked in some extra money because the partner who was leaving had been instrumental in setting up a number of good profitable jobs that were not yet reflected in the company balance sheet. We were not under any obligation to do this
I used the book value on the FASFA form. I don't think that the colleges are concerned about anything else. If your company is worth a lot more than this, it will no doubt be reflected in your annual income.
Goodwill has no value unless it has been paid for by a buyer. The value of good will is the price paid for a company above its book value and is amortized over a period of years. An accountant could tell you about the particulars of this but it has no effect on your present situation.
Thought this one was interesting.......................
Florida - PROFITABLE COMMERCIAL PAINT CONTRACTOR
Revenue: $1,529,537 EBITDA: $217,326 Price: $499,000
Long established SW Florida commercial painting contractor specialing in complete Exterior & Interior painting of New Homes in Builders/Developors Subdivisions. This turnkey business is 25+ yrs old complete with all equipment, vehicles paint crews and management in place.
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