My wife and i need to determine the value of our biz. We have a candidate for partnership in mind but are unsure of how much the buy-in should be. we’ve been running for about 1 1/2 years and have put a good deal of blood, sweat and tears into the mix. Our business is robust, but small. To evolve further we need another high-level player. Looking for someone who has experience in these matters, (accounting or law backgrounds). English a must. Anyone able to point us in the right direction? Reply with phone number and we will discuss particulars.
thanks for reading.
My thoughts:
I understand that you must have put much blood sweat and tears into your business and I would point that out to your potential partner not because its going to reflect at all on his buy in, but its likely that its going to reflect on how much he will need to put in should he accept your proposition.
Generally the way that it should be valued depends on turnover/cashflow. These days franchise buy ins are valued depending on how much they are expected to earn for their franchisee. Its like an investment. For example if your business were to generate 1 million NT in a year then an established business may be able to charge 10x that value to provide the franchisee with a 10% return on his investment. (wages not included).
However, since your business is also a startup, it makes it more risky. Its not likely that you will be able to charge this kind of markup.
If I were you, I would list out all of the things that make your business great, why you are passionate about it and why you think that it has the potential to succeed. I would also write up a roadmap of where you see it going in the next few years given the correct guidance and partners. Then perhaps a short summary of what you think your business can provide to those that put in the effort to succeed.
After that you should have a great sales pitch. Don’t even talk money until you have them grinning as much as yourself about the potential. Make them want it…
Then after that, rather than offering a buy in price, ask them what you think it would be worth to them to come on board and work from there. If they go too low, which is likely, then work your way up, reinforcing the potential of the business.
Calculate the number of hours you have put in to get as far as you have and ask your potential partner if they would be willing to do the same.
Another tactic you could use is to let them know you are looking at a number of potential business candidits (remember it should be made clear that you are doing them a favour, not the other way around).
If I were you, I would probably prefer to have a temporary arrangement to begin with… business partnerships can be very fickle…
I wish you luck in your endeavour… if I think of anything else, I’ll post it.
regards,
J
Thanks for that Tyc00n
Those suggestions helped. My gradeschool friend of 20+ years is the one who is interested. We are like family so I want to make sure everybody gets a fair shake. We have a small school with 100+ kids near Kenting and are growing fast. He holds a proper Ed degree and would really be an asset to the business. Weve sat down and talked and are both a little unsure of how to proceed. Anyhow, I will talk to my parents back home and see what they think. thanks again, Ed