After six years, I am selling my business to my partner. We bought it for $420k with annual revenue around $800k and a profit of $65k. From 2019 to 2023, we made between $1.1M and $1.2M in sales, with a $90k profit each year.
In 2024, sales are still at $1.2M, but profit dropped to just $35k due to increased costs. My partner is offering me $150k for my share, though I originally paid $210k. Even though we’re making more sales than when I bought the business, it’s much less profitable this year.
Should I accept the $150k buyout, or should I try to negotiate for a better price?
Keenan said:
I’d suggest getting an independent appraisal. It’ll give you a solid value for the business and help keep things smooth between you and your partner.
But don’t spend too much on an appraisal. A lot will depend on the competition in the industry and whether you can raise prices without hurting profits. Also, think about your inventory — if it’s paid off, how much could you sell to reduce costs? If you can’t agree with your partner, maybe sell what you can and walk away.
Keenan said:
I’d suggest getting an independent appraisal. It’ll give you a solid value for the business and help keep things smooth between you and your partner.
Keenan said:
I’d suggest getting an independent appraisal. It’ll give you a solid value for the business and help keep things smooth between you and your partner.
I’m a bit doubtful that an independent appraiser will understand the business value better than you and your partner. It’s your business after all.
@Bliss
A good independent appraiser can still provide a good starting point. They can look at the financials and industry trends to give you a realistic value. They might not know the business as well as you, but they can still offer a fair estimate, especially if you both disagree on what it’s worth.
@Bliss
Financial results are important, but an appraiser can also check if your salaries are reasonable, whether you’re holding too much inventory, or what the business multiple should be. The original price you paid might not be as relevant now, but an appraisal can help you figure out where it stands.
Seems like you have doubts, and the fact that you’re asking means you’re not sure. If your gut feeling says the offer is too low, trust your instincts. If there’s no rush, you can always get more information before deciding.
Having sold three businesses myself, there’s not enough info here to give a proper valuation. But generally, six months to a year of profit, plus wages for both of you, is a good starting point. If profit is down and there aren’t more assets, it’s probably worth less now.
There’s just not enough information to give a clear answer. Some small businesses don’t become profitable right away, but you were profitable in your first year, so it’s worth considering.
You can’t really estimate the value without looking at your income statements, balance sheets, and cash flow. These are crucial for making a fair judgment.
You didn’t mention what type of business it is. That matters because different businesses have different value multiples. Seems like everyone’s suggesting the same thing: get an appraisal.
It’s impossible to say based on the info you’ve given. Your partner might be trying to undervalue it now and plan to raise prices after buying you out. If that’s not clear to you, just take whatever you think is fair and move on.