Putting a price on a business for sale

Hi,

I have been looking at a business thats for sale recently and want to know if the asking price is fair. Its a wholesale business supplying to 100 clients with a turnover of 400K. The asking price is 150K and as far as i can tell from the initial call is all thats for sale is the client list and supplier list, it doesnt include any stock, premesis, etc. He tells me the profit is 30% of turnover. I have decided to investigate further but was wondering if this is a fair price for the business minus any tangable assets?

X.

a customer list that some employee could walk away with and try and supply on their own....?

It's not very meaningful information. Certainly, investigate further, but be very wary.

What does "profit" mean? Does it take account of the amount of work that you have to put into it? Does it take into account the cost of funding the business? And as contemporary asks, is it sustainable?

If you want to progress it further, you must talk to an accountant who can advise you on it.

Brendan

Be very careful. At a turnover of 400K it most be very profitable after wages and raw materials to justify a price of 150K.

If the turnover is 400k for 100 clients, on an equal basis that is 4k per client per year. Can't be a very important supply chain to the clients and in the clients case the business could easily be poached. On the basis of the info you have been given so far, why is it for sale ?? The price is a bit smelly. I would take the correct price with the brief info so far should be around 70k if that.

you need to see the books in detail before you make any decision . what are the margins , the running costs and are the 'clients ' repeat buyers

The 4K per client average is what would frighten me away. It looks like a very thinly spread business. Unless you know the business, the clients and your competition I wouldn't touch it. If you do know these things then you should have a gut feeling one way or the other about the price.

If the profit is really 30% of turnover, (i.e. 120k per year) then 150 would be considered way too cheap in normal circumstances. So something's not right with these figures, or with the future of the business.