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quick sense check

No I'm not looking for a free professional valuation just a quick one sentence (yes I know it is not that simple but.....)

Client has a plant hire business (cranes) and does very well. T/over £1m, profit (before divis) £300k. No finance, no debt. They simply hire out the cranes they own.

Cranes have a market value of £600k.

Client asked in an email today - if I were to put my company on the market - what would I get?

Obviously, as I said above, there is no quick answer, but I am guessing a multiple of profits (say 3) as adjusted for salaries and the value of the cranes (lets assume no other assets/liabilities)

If it were 3x plus cranes the value would be something like £1.4m - any very brief thoughts welcome, I am seeing him this evening to sign his TR and a pint!

Offers please!


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22nd Jan 2013 12:45

Ignore the crane valuation

The value of the cranes are irrelevant if company sold as going concern.

Just use a profit multiple (in simple terms). The cranes are used to generate that profit, so dont bring them in as additional.

If profits were lower, you might want to value on a break-up basis, when the asset values are relevant.

Thanks (1)
22nd Jan 2013 13:07

Should have asked on Twitter DD

That would force a short answer.

Assuming the business has been around for a time and has a good name, I'd work on a whole business valuation of perhaps 6-10 x post tax adjusted profits.  Then compare it with a rule of thumb goodwill valuation of perhaps 1-3 x (pre-tax and pre-owners' salaries) profits + £600K.

This can only be a starting point as, in a business sale, the type & plans of the prospective purchaser come into play, ie do they just want the kit & name to tack onto their already well established biz or are they entering the business fresh.

Make it 2 or 3 pints and it won't matter much what you say!

Thanks (1)
22nd Jan 2013 13:09

my starting point

My starting point for an ongoing, successful business is to tell clients to aim for between 5x net profit and 1x turnover, that usually gives a range. As always reality intervenes and it comes down to what a buyer will pay.

Thanks (1)
By Old Greying Accountant
22nd Jan 2013 13:20

The important thing is ...

... to find a best fit buyer.

This takes skill and expertise, and the best fit may at first seem unlikely.

The GOLDEN RULE is however to never suggest a price to a buyer as you immediately put a ceiling on the price.

You might want to sell to a company that currently rents diggers and land movers and want to expand into cranes, or you might sell to a user fed up with renting them in. The worst deal would be with a competitor as they will value on an asset stripping basis not as a going concern.

Talk to a professional firm, my recommendation would be this bunch

(and no, I'm not on commission, just very impressed with them)


Thanks (2)
22nd Jan 2013 13:22

Thanks all

especially the point about removing the cranes, the owner is very attached to them!!

Will mull over and have the chat over a pint later - I owe you a pint each!


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22nd Jan 2013 14:45

Normalised profits

You can also consider the 'normalised' profit numbers as a multiplying basis if there are any expenses that the current business has that would not necessarily incur if it was owned by someone else - things like directors lifestyle costs for example.

Again depending on the buyer there are the the synergy savings that will add value to the business.

Enjoy the beer!

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22nd Jan 2013 21:15

just a quick update

I discussed the business valuation methods etc and explained what it might be worth, he told me that he "just wanted to know so he could put it in his will"

Although he was interested in some of the potential numbers!

We only had a couple, perhaps I should have stayed 'cos I reckon by the time we'd finished he may have talked himself up to £10m !!!!

Thankyou all very much again for teh fast and helpful responses earlier - next time I should ask "why" before going further!


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