How do you value your business?

[rob1963]

Someone recently suggested that when I retire I could sell my business as a going concern rather than just closing it down, and this was something that had crossed my mind a couple of days ago.

After all, by the time I retire, it will have been running as a full time business for about 10 years, with all the advertising in place & generating a decent amount of work.

The problem is that I have no idea how I'd value it. Would it be a certain percentage of the annual turnover or profit it generates, or are there other important factors to take into consideration?

Any advice would be appreciated, but this is a serious thread, so I really don't want any comments about my kit or the fact that my business is only worth 50p etc.

Thanks in advance for your thoughts & advice.

:)

[soundtracker]

What you are selling is the "Goodwill", which is notoriously difficult to value. You would need to work out how much of your profit comes from regular business, and how much is one-off, the regular business may have a value, the one-off won't. With the regular work, you would need to ascertain whether the work will continue to be available without you, if it is contracted it will be worth something, if its an ad-hoc arrangement, it is not really saleable. If you are selling on a full diary, again this will have value, if you stop taking bookings, then I guess that more or less kills off the goodwill. The website may again have some value if it shows up well in the search engines, but realistically, who is going to want to trade as Rob James, and how happy would you be for them to continue to do so? Hope that helps a bit!

[rob1963]

but realistically, who is going to want to trade as Rob James, and how happy would you be for them to continue to do so?

That was another question which had crossed my mind, and which I also couldn't answer!

Thanks for your thoughts...which have added a small weight to the "close it down" side of the virtual scales.

[soundtracker]

That was another question which had crossed my mind, and which I also couldn't answer!



and just to clarify, exactly the same applies to me!:)

[Vectis]

but realistically, who is going to want to trade as Rob James, and how happy would you be for them to continue to do so?


Rob still has time to "modify" his company name to something a little more generic in order to sell it on. For example, drop the "Rob".

James Entertainment is much more generic and you could transition the name over a period of time, say 1-2 years, by keeping the same logo, fonts etc. and initially bracketing the 'Rob' and then losing it altogether.

Or choose an entirely new name, again keeping the logo style and fonts, and adding 'formerly Rob James Entertainment' to the end.

I'm presuming of course that you're a sole trader and there's no issue around company names etc. involved.


Even if you were to sell on the business for half what the diary contains, that's going to be a reasonable parting gesture. Obviously the kit doesn't figure... :p

You'd obviously have to be upfront with customers booking post-retirement-date and have a fallback agreement with one of your agency buddies to take on the diary in case the business doesn't sell, but again, you have plenty of time to arrange this.

[BeerFunk]

As a sole trader, I'm not sure how most of your assets can be transferred, really. As you have stated on several occassions, you're not selling your kit to clients, you're selling your services, which retire with you!

[Vectis]

As a sole trader, I'm not sure how most of your assets can be transferred, really. As you have stated on several occassions, you're not selling your kit to clients, you're selling your services, which retire with you!

Rob's accountant will no doubt come up with the most efficient way of doing it, but any assets not fully depreciated will be sold at book value as disposals, and anything over and above this amount will be treated as general revenue and taxed accordingly.

[BeerFunk]

Rob's accountant will no doubt come up with the most efficient way of doing it, but any assets not fully depreciated will be sold at book value as disposals, and anything over and above this amount will be treated as general revenue and taxed accordingly.Well yes, but tangible assets such as the van and gear are easy enough to value and sell, and even the website and domain (which as has been mentioned, may need a name change or re-direction).

What you can't sell is your years or decades of experience, and your ability as a DJ - and this is the main asset of most sole traders, I'd imagine.

[Vectis]

What you can't sell is your years or decades of experience, and your ability as a DJ - and this is the main asset of most sole traders, I'd imagine.

Ah - gotcha! Sorry, bit slow today.

I guess the only way to sell your soft skills is to provide an amount of 'consultancy' during a handover period, with the buyer gradually taking on more and more of the actual doing.

[rob1963]

Having read the replies so far, the more I think about this, the more I'm going off the idea!

[DazzyD]

...
Funnily enough, this thought crossed my mind a couple of days ago, but I had no idea how I'd value it. Presumably it would be a certain percentage of the annual turnover it produces. Maybe I'll look further into this option.


I'm not going to go in to the complexities of valuing a business but my advice is to get it done professionally. You might just be surprised! ;)

[NKR]

The other issue is that the goodwill is attached to you. How many of your repeat clients would be happy with you calling and saying some other guys is doing it now as I have sold my business to him.
Any purchaser would want to carry out due diligence on any repeat work you have put a value to. If they are not happy using Johnny come lately it has little value.

[discomobiledj]

Rob, the easy way:

Take 3 years nett profit, add them together
Divide by 3 to get the average
Times by 2 to get what your business is worth.

for example:

£10,000 nett profit every year for the last three years
Times 3 = £30,000

£30,000 divide by 3 to get the average £10,000

£10,000 x 2 = £20,000

So your business would be worth £20,000 plus 2nd hand value of equipment (if all new)

[Vectis]

You're certainly thinking about this at the right time. If there's any planning needs doing or changes making, you now have plenty of time before your last full year's trading (which will be the most important set of numbers when it comes to selling up).

If there's any expenditure, get it out of the way now so that it disappears in the mists of time.

[CRAZY K]

Someone recently suggested that when I retire I could sell my business as a going concern rather than just closing it down, and this was something that had crossed my mind a couple of days ago.

After all, by the time I retire, it will have been running as a full time business for about 10 years, with all the advertising in place & generating a decent amount of work.

The problem is that I have no idea how I'd value it. Would it be a certain percentage of the annual turnover or profit it generates, or are there other important factors to take into consideration?

Any advice would be appreciated, but this is a serious thread, so I really don't want any comments about my kit or the fact that my business is only worth 50p etc.

Thanks in advance for your thoughts & advice.

:)

To be honest Rob unless you have regular Contracts with Hotels and other organisations which bring a quantifiable (big word :D ) amount of revenue documented over many years then --not a lot.

The equipment is worth whats it worth.

Otherwise yes as already highlighted its the unquantifiable--good will.

Incidentally two things---

All businesses think they are worth far more than the are--proven fact

No one buys a business (other than household brand names) for straight cash unless its a heavily discounted sum OR without a hangover meaning they look at the profits generated over a year or two AFTER THE BUSINESS IS SOLD and have a formula based on that.

Its difficult to predict the results.

Thats always been the way of looking at it.

The website however is a newer innovation and can be very very powerful in generating new business enquiries and resulting income.

You might find by taking Martins suggestion ( create a Corporate ID) you can create the illusion of having a business less reliant on a single person.

Maybe your best bet ( which Angela my wife is doing right now) is to use the sites high position on the net to generate enquiries which you pass on to other DJs eventually acting as an Agency in your own right, even if today you pass the booked dates to a friend you could run it yourself from the comfort of your home or holiday residence on the Internet without ever having to lift a Peavey tear drop handle speaker again.;) or going anywhere near a Disco.

Of course I dont know your retirement plans, perhaps you will spend the rest of your life on a beach in Thailand cut off from communications in which case this idea is not going to work.:eek:

CRAZY K

[StarZSoundS]

:offtopic:

[ppentertainments]

Rob, the easy way:

Take 3 years nett profit, add them together
Divide by 3 to get the average
Times by 2 to get what your business is worth.

for example:

£10,000 nett profit every year for the last three years
Times 3 = £30,000

£30,000 divide by 3 to get the average £10,000

£10,000 x 2 = £20,000

So your business would be worth £20,000 plus 2nd hand value of equipment (if all new)
Apart from the x2 bit I was told similar. ie find your average net profit over the past 3 years and this figure is a rough guide to what your business is worth, then add on any equipment value (hang on Rob may be better not to bother with this :p )

[discomobiledj]

I used to be a commercial estate agent and this is the formula that the banks use.

[ppentertainments]

I used to be a commercial estate agent and this is the formula that the banks use.
Cheers for that - I am now worth twice as much as I thought :D :D :D

[Solitaire Events Ltd]

To be honest Rob unless you have regular Contracts with Hotels and other organisations which bring a quantifiable (big word :D ) amount of revenue documented over many years then --not a lot.

The equipment is worth whats it worth.

Otherwise yes as already highlighted its the unquantifiable--good will.

Incidentally two things---

All businesses think they are worth far more than the are--proven fact

No one buys a business (other than household brand names) for straight cash unless its a heavily discounted sum OR without a hangover meaning they look at the profits generated over a year or two AFTER THE BUSINESS IS SOLD and have a formula based on that.

Its difficult to predict the results.

Thats always been the way of looking at it.

The website however is a newer innovation and can be very very powerful in generating new business enquiries and resulting income.

You might find by taking Martins suggestion ( create a Corporate ID) you can create the illusion of having a business less reliant on a single person.

Maybe your best bet ( which Angela my wife is doing right now) is to use the sites high position on the net to generate enquiries which you pass on to other DJs eventually acting as an Agency in your own right, even if today you pass the booked dates to a friend you could run it yourself from the comfort of your home or holiday residence on the Internet without ever having to lift a Peavey tear drop handle speaker again.;) or going anywhere near a Disco.

Of course I dont know your retirement plans, perhaps you will spend the rest of your life on a beach in Thailand cut off from communications in which case this idea is not going to work.:eek:

CRAZY K

Very good post and lots I agree with and know to be true.

I nearly sold up about 3 years ago, so had to look into it in a big way.

[yourdj]

Say for arguments sake he changed the name and worked out what it was worth and had a diry full of bookings how would he go about selling it?
Would you get a professional broker to put it up for sale or ring round all the local DJ's who probably do not have a penny between them?

I could understand if it was a corporate event business with a history of impressive clients but without some decent residencies i cant see how it can be worth anything?

Take my business. I trade off Toby. Although yourDJ.co.uk must be worth a few bob i would de-personalise (turn it back to yourdj) it over three years and turn it more in to an agency using the same techniques i have done to create my current business and get some really good residencies.

Even then how do you value that and how would you sell it?

Ebay LOL

[Vectis]

Why not broker it? Especially as Rob has a cut-off date and a long lead-time.

Approach the more affluent local jocks a good 6-12 months beforehand to give them the opportunity to manage their business plan to incorporate Rob's business or even take on the rig+bookings as another going concern multi-op.

Ebay whatever kit's left over (not much point sticking it on here, apart from the d2 & idj2 perhaps :p )

[CRAZY K]

Rob, the easy way:

Take 3 years nett profit, add them together
Divide by 3 to get the average
Times by 2 to get what your business is worth.

for example:

£10,000 nett profit every year for the last three years
Times 3 = £30,000

£30,000 divide by 3 to get the average £10,000

£10,000 x 2 = £20,000

So your business would be worth £20,000 plus 2nd hand value of equipment (if all new)

Yes but if thats relying on the Internet its worthless--its only if you have a business of rock solid connections like Hotels and the like that its really possible to use that calculation.

i.e. a proper customer base.

CRAZY K

[DazzyD]

I did mention the complexities of valuing a business!

The average annual nett profit times 2 is definitely a possible method.

However, I would also explore and sell the "potential" of the business. Rob is a single op and his business ticks over nicely to help him reach his goal of early retirement. However, this could be used as a base for expansion and company growth. That's what I look at when looking at new opportunities anyway. Not what the opportunity is doing right now but what is potentially achievable with that opportunity. It is a risk but when taking on a new venture you need to look at the risk-to-reward ratio.

As for the name of the business, I would never make a business identity personal as this adds no value to the business whatsoever (unless we're taking about major national chains - ie WH Smith - whereby the name is instantly recognisable). Any potential buyer would have to factor in the cost of renaming and rebranding the business. However, as Martin and Crazy (I think - it's taken me a while to type this post and my memory isn't what it used to be!) have said, in Rob's case now would be a good time to start planning and phasing out the personal name and rebranding as something more appropriate to making the business an attractive opportunity for an investor.

There are also some good points in the thread about the business being based on Rob's own skills as a DJ/quizmaster/etc. However, if the business was to be less personalised then I don't think this would be too much of an issue. When dealing with potential clients, I sell the skills that "Lightning Disco" can provide as opposed to what I can do for them personally. Therefore, my reputation is connected to the business more than Dazzy'D'. I think this would add to the attractiveness of the business to a potential buyer.

I must point out, though, that my business is a family venture and we hope to keep it in the family when we hang up the 'phones personally. However, just in case no-one in the family want to take it on, it's best to have other options for disposing of the business for the best return.

[discomobiledj]

That is how all commercial agents work out the value of a business. I used to be one!

[DazzyD]

I used to invest in opportunities! Made one bad decision and lost a small fortune!

But that's history now!

[Solitaire Events Ltd]

That is how all commercial agents work out the value of a business. I used to be one!

Is a sole proprietor considered a business then?

[DazzyD]

I would have to say that a sole trader is one of the recognised forms of business structure so the answer has be to yes.

I think the point you're getting at is that more "solid" forms of business ownership/structure (such as your own "Limited" liability business) are, ultimately, more saleable but that doesn't mean a sole trader can't have a viable business that would interest a buyer.

[rob1963]

Thanks for all the posts, which I've found very interesting.

Having read all the advice & given the matter more thought, I've decided that I will close down the business rather than trying to sell it as a going concern, mainly because this seems to be the simplest option.

I don't like the idea of having to change the business name for my last year or two of trading, and Rob James Entertainment is me...so when I retire, it makes sense that the business should retire with me.

In addition, I wouldn't have to worry about explaining to regular clients that they'll have a different DJ in future as I've sold the business, and I wouldn't have to worry about standards dropping with the people that took over.

Thanks again for all your advice.

:)

[DazzyD]

I think that owners, especially small-scale and family-owners, tend to have a sentimental attachment to their businesses and are more likely to either dissolve the business or pass it down to a younger generation in their family. Most wouldn't even have thought about a sale so your decision is quite a common one, Rob.

It's quite interesting how my off-topic comment in the music section became a thread of it's own with a lot of valid information that could well help someone think about a different way of doing things that might suit themselves better. I agree it's very complex territory but it's an option that the vast majority of people on here have probably never even considered.

[BeerFunk]

Rob, you have mentioned before that you have another DJ who covers for you - could you do a deal with them perhaps?

[rob1963]

I think that owners, especially small-scale and family-owners, tend to have a sentimental attachment to their businesses and are more likely to either dissolve the business or pass it down to a younger generation in their family. Most wouldn't even have thought about a sale so your decision is quite a common one, Rob.

Thanks Dazzy.


It's quite interesting how my off-topic comment in the music section became a thread of it's own with a lot of valid information that could well help someone think about a different way of doing things that might suit themselves better. I agree it's very complex territory but it's an option that the vast majority of people on here have probably never even considered.

I agree that this has been a very interesting thread, and I'm amazed that this has not come up before (unless it has & I just can't remember!).


Rob, you have mentioned before that you have another DJ who covers for you - could you do a deal with them perhaps?

Thanks for the suggestion, BeerFunk, but the other guy is already in his 50's, and has told me he'll also be retiring around the same time than me.

[CRAZY K]

I agree that this has been a very interesting thread, and I'm amazed that this has not come up before (unless it has & I just can't remember!).



No one else is thinking of retiring Rob

Even if they ought to be --cough;)

CRAZY K

[rob1963]

No one else is thinking of retiring Rob


I want to retire so I can have lots of nice holidays.

Compared to me, most other people don't NEED to retire...as they have holidays every year anyway (However, MY last one was 10 years ago!).


Even if they ought to be --cough;)


:D :D :D

[Corabar Entertainment]

So (taking this thread off-topic, I know, but I think your original question has been answered now... more or less).... what do you plan to do once you're retired Rob? (If you don't mind sharing, that is?)

[rob1963]

So (taking this thread off-topic, I know, but I think your original question has been answered now... more or less).... what do you plan to do once you're retired Rob? (If you don't mind sharing, that is?)

I don't mind sharing at all, Angela.

In short, lots of travelling (to make up for all the holidays I haven't had!).

I have a couple of friends who will be retiring around the same time as me, so I'll probably travel with one or both of them.

Top of the list are Australia, Thailand (a friend has a villa there), The USA (I went ages ago & can't wait to go back), The Maldives and South Africa. I also want to visit a number of European countries.

No doubt I'll also start a thread nearer the time asking for more suggestions.

:)

[Corabar Entertainment]

Nice :approve:

[rob1963]

Thanks Angela.

Trouble is, It recently occurred to me that when I originally worked out how much I needed to save for my retirement, I only included basic living expenses, and completely forgot about the holidays I'll be wanting to have.

Therefore, I probably need an extra £30-£40k, in which case it looks like I might have to retire at 51 instead of 50!

:(

[Corabar Entertainment]

That's one hell of a punishing schedule for the Djing / quizes during that extra year Rob! (that is: one that enables you to put £40K in to the savings fund - ie £40K above and beyond your living expenses for that extra year!!!)

You'd better get VAT registered quick!

:lol:

[rob1963]

That's one hell of a punishing schedule for the Djing / quizes during that extra year Rob! (that is: one that enables you to put £40K in to the savings fund - ie £40K above and beyond your living expenses for that extra year!!!)

You'd better get VAT registered quick!

:lol:

Lol!

I'm not suggesting that I can save £30-£40k in one year on top of my living expenses (although my living expenses are probably far lower than you'd expect).

Much of the extra money will come from saving more than originally planned each year between now & then, with the balance coming from working an extra year or so longer than previously expected.

However, if things don't carry on improving in the next few years, I might have to struggle on until the age of 52!

:eek:

[soundtracker]

, I might have to struggle on until the age of 52!

:eek:

It is possible!

[rob1963]

Oh yes...it's just not an ideal situation for me!

[Corabar Entertainment]

It is possible!How do you know Pete?..... you haven't made it yet :p :p :p :eek:

[DeckstarDeluxe]

Rob you thought about retiring from djing and becoming a multi op instead so you maintain a small income and all you need to do is take bookings and send out djs on your behalf?

[CRAZY K]

Rob you thought about retiring from djing and becoming a multi op instead so you maintain a small income and all you need to do is take bookings and send out djs on your behalf?

I did suggest the Rob James DJ Agency idea but it didnt seem to happen;)

Its got a ring to it though:cool: :cool: :cool:

CRAZY K

[rob1963]

Rob you thought about retiring from djing and becoming a multi op instead so you maintain a small income and all you need to do is take bookings and send out djs on your behalf?


I did suggest the Rob James DJ Agency idea but it didnt seem to happen;)

Its got a ring to it though:cool: :cool: :cool:

CRAZY K

Thanks for the suggestion guys.

However, when I pack in the discos & quiz nights, I want to do a lot of travelling. Therefore, it won't be possible to run a multi op or agency, as there will be a fair amount of time when I'm not here.

Apart from that, when I talk about retiring that's exactly what I mean. No more work whatsoever.

:D :D :D

[StarZSoundS]

Thanks for the suggestion guys.

However, when I pack in the discos & quiz nights, I want to do a lot of travelling. Therefore, it won't be possible to run a multi op or agency, as there will be a fair amount of time when I'm not here.

Apart from that, when I talk about retiring that's exactly what I mean. No more work whatsoever.

:D :D :D

It don't always work like that Rob.....you have an active mind judging by the amount of posts you make.....you may get bored... and you MAY need something to get up for in the morning.

My Dad was Station Officer at the local Fire Station.When he retired he ended up putting up the For Sale boards for a local Estate Agent....didn't need the money...just needed somefhing to do!!;) ;)

[BeerFunk]

It don't always work like that Rob.....you have an active mind judging by the amount of posts you make.....you may get bored... and you MAY need something to get up for in the morning.

My Dad was Station Officer at the local Fire Station.When he retired he ended up putting up the For Sale boards for a local Estate Agent....didn't need the money...just needed somefhing to do!!;) ;)I don't know... have you ever seen One Foot In The Grave? :D

Besides that, Rob, you've been on this forum for exactly 3 years now, making over 21,000 posts in that time. That's over 7000 posts a year, equating to about 20 posts a day. Will you be able to give this up?? :)

[StarZSoundS]

I don't know... have you ever seen One Foot In The Grave? :D

Besides that, Rob, you've been on this forum for exactly 3 years now, making over 21,000 posts in that time. That's over 7000 posts a year, equating to about 20 posts a day. Will you be able to give this up?? :)


Good point!!


He could be a visiting QuizMaster at my Sunday Quiz Night.....It needs a bit of a revamp!!:eek: :eek:

Any other retirement work for Rob????????????

[rob1963]

I don't know... have you ever seen One Foot In The Grave? :D

Besides that, Rob, you've been on this forum for exactly 3 years now, making over 21,000 posts in that time. That's over 7000 posts a year, equating to about 20 posts a day. Will you be able to give this up?? :)

To be honest, BeerFunk, assuming I haven't been banned, I'll probably still post here...just a lot less then I do now (as I won't have the time).


Good point!!


He could be a visiting QuizMaster at my Sunday Quiz Night.....It needs a bit of a revamp!!:eek: :eek:

Any other retirement work for Rob????????????

Isn't "Retirement work" a contradiction in terms?

[Corabar Steve]

I'll probably still post here...
NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO OOOOOOOOOOOOOOOOOOOOOOOOOOOOOO

:sj:

[rob1963]

:lol:

[ppentertainments]

Rob I think you need to live in the real world with pressure, stress, money worries, arguments, torment - ie find yourself a wife :eek: :D :D :D

[rob1963]

:Laugh:

[soundtracker]

How do you know Pete?..... you haven't made it yet :p :p :p :eek:

Only 9 days to go though!:p

[rob1963]

find yourself a wife :eek: :D :D :D

You sure?

9 million single people can't be wrong!

:D :D :D

[StarZSoundS]

Only 9 days to go though!:p



As we get along so well I'm going to send you my most prized possession as a birthday gift.





















My Black Lace.....Party Party Party CD;) ;) ;) :D :D :D

[soundtracker]

As we get along so well I'm going to send you my most prized possession as a birthday gift.



















My Black Lace.....Party Party Party CD;) ;) ;) :D :D :D


I promise to treat it with the respect it deserves!:D

























Now where did I put that sledgehammer!

[StarZSoundS]

You sure?

9 million single people can't be wrong!

:D :D :D


The trouble is 8.8 million of them are not in that situation by choice!!


:devil: :devil: :devil: :devil: :devil: :devil: :devil:

[Pe7e]

The trouble is 8.8 million of them are not in that situation by choice!!


:devil: :devil: :devil: :devil: :devil: :devil: :devil:

There's a lot of married people out there who wish they were single, but can't afford the luxury.;)

[DazzyD]

How about becoming a lollipop "lady", Rob?

They don't tend to start their job until they've retired from their working lives!

[rob1963]

The trouble is 8.8 million of them are not in that situation by choice!!

They should have thought about that beforehand!


There's a lot of married people out there who wish they were single, but can't afford the luxury.;)

:Laugh:


How about becoming a lollipop "lady", Rob?

They don't tend to start their job until they've retired from their working lives!

Good point...I guess it might be able to fit it in between my holidays!

[DeckstarDeluxe]

yeah I couldnt imagine myself retiring and just doing nothing at all. I'd need something to do be it spend time with the family or hobbies etc....