Business valuation?

What kind of phone business? Infrastructure, handsets, software? Based in which economies? Does it have large debts or cash?

Phone betting business.
No debts and relatively no overheads.

I'm no business student so I'm guessing here, but surely worth a million or two I'd guess then, assuming the business isn't trivially easy just to copy? What gives the business value, where does it get it's repeat business? If you can't work out what stops competitors eating into it's business then steer clear, might just have been a purple patch, needs to prove a few years good profits and growth. Really need a business plan and a lot more information to make a proper valuation though.

I'll hazard a guess that you would find it virtually impossible to sell in the current climate with the possibility of taxation increases in the offing and the difficulties in tranferring that type of business from one owner to a new one.Is the net profit after deducting wages and/or owners drawings?

Yes,
Good business but working 365 days a week and would like a life....
Not too pushed to sell but do not count on doing this for ever,all it could take is one big tax change or big winning bet and I could be out of business.

In any market in order to sell you have to find a buyer and I think it would be very difficult for numerous reasons

1.The big firms are trying to eliminate phone betting and have customers using the more cost effective internet accounts.None of those would be a buyer.

2.The number of individuals who would be interested would be very small because of the combination of the long hours and the relatively few people with expertise in the area.

3.Any other prospective buyer would be put off by the lack of a tangible location where profit can be made e.g a premises.There would be very little to stop someone poaching a few of your more profitable customers.

any idea of another business you are comparable to in terms of business model?

Not that much imo. Your customers can easily go elsewhere and some of them may be very sharp and difficult to beat.

There are few barriers of entry (other than a betting licence) and anyone could start a business on their own without paying you goodwill for your clients. The big betting chains ignore phone business in their calculations when buying a LBO from an independant.

Based on your annual net profit of 85k then if you got say 6 months profit ie 42.5k then that could be a decent result given the scant information you have provided.

Been offered  200,000 over 6 years if turnover is kept roughly as is.
Decision time.

that caveat is massive.... Price seems ballpark ok without caveat.

if t/o stays as is and you don't sell you'll make £510k...so why sell?

you haven't really covered lots of things an advisor would want to know... Do you work on it now?, do you take a salary?, will you work on it after sale? How will buyer be incentivised to make it a success after sale? Any Key man risk?

Basically I will get the 200,000 for absolutely nothing as I will only have to collect the money every three months or else keep working 14 hour days for the next 5 years for twice that. 
Money V A life I suppose.

so the 85000 profit is before any wage payments to you?

I work lots of hours and get roughly 30,000 a year and after all other expenses there is 85,000 still left in the kitty. Company profit tax paid then.. About 10,000. Rest company profit.

ok, there's no problem with an unaccounted salary in valuation then.  The other issues could be business risk and the ongoing incentives of the buyer.

Risk: you're selling up, but still end up with the downside risk (usually the seller is selling the upside and downside risk).  What happens if turnover falls?

Incentives:  If turnover falls can the buyer just shut down the business and walk away saying 'it didn't make enough money for me to pay you'?

obviously these 2 are linked.

Why are your clients betting with you and not with whoever is best price?

If there's a value to the personal relationships you've built up with them, how will this be preserved once the 200k sale goes through?

irishbookmaker
01 May 12 17:23

Basically I will get the 200,000 for absolutely nothing as I will only have to collect the money every three months or else keep working 14 hour days for the next 5 years for twice that.
Money V A life I suppose.

I think you know the answer to this already, irishbookmaker. Snap their arm off.

Keep a few decent once a week merchants and back door that cash , sell the rest.

When you say All you have to do is collect the money every 3 months I take it there are contingencies on you receiving the full amount.What happens if

1 Turnover targets are not met?
2 Profitability targets are not met?
3 Who measures whether the targets are met?
4 If you do not receive the money how do you set about getting   your business back?