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Old 20th September 2016, 09:58 PM   #1
ResinChin
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Default Big Company Wants To Buy My Small Company

Yesterday out of the blue I got a call from "Rob" and he says he's tried my product and wants to talk about it. Today I go to their office and it's an ivory tower--super nice place overlooking the bay, they are a huge company. They are a great fit as a partner to help expand my product.

I really WANT a larger company to buy my company because what I've created needs the marketing support of a large group.

My little company created an incredibly high quality food, let's imagine it's a cake frosting (it isn't). And I invented a great frosting with fantastic flavor, better than anything on the market and it's packaged in a super modern unique way that will grow in the future.

I wonder what kind of price I can ask this company to pay for the formula, brand (it's about 3 years old), and everything that has to do with it. As of now, the product is distributed in local stores and it's becoming quite popular. Revenues are not that great but it's selling. I suppose I've sold about 20,000 packages in the last year, and I just took on a new account that has the potential to double that. I have one main competitor, and that company is selling all over the place and they are doing really well but my product is WAY better.

The frosting business was started by myself. It is part of my main company which is, let's say, manufacturing cake pans. So the investing company probably isn't that interested in the cake pan side of the business, but I want to tell them it's a package deal. I want $1M for this entire thing. It's 18 years old, revenues are about $1M per year. I have paid myself about $80k per year and after all is said and done, there is always another $50k on top of that. So if someone pays me $1M they will get an existing company that will bring in at least $50k per year pure profit after paying staff, plus they get the cake frosting formula and all my expertise. They really want to get into the frosting business and would need to find an expert, and there are very VERY few people who know what I know.

Thanks for any suggestions. The company has given me three days to come up with a written proposal. Then four days after that, we will have a 90 minute meeting.

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Old 21st September 2016, 09:58 AM   #2
torka
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How exciting!

Let me preface this by saying I am not an expert in valuing businesses. There's an entire profession devoted to that.

That said, remember it's not always just about revenue or profits. Be sure to consider the value of your inventory, equipment and other assets if those are significant and will be included in the sale. And I'm sure you're aware of this already, but it bears repeating... be sure to ask for a little more than what you might calculate as the "right" price to allow wiggle room for negotiating.

You may find this article helpful:
https://www.bizbuysell.com/buyer_res...a-business/06/

It outlines various methods for valuing a business and walks you through the calculations.

Best of luck! Be sure to come back and let us know how things went.

--Torka

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Old 23rd September 2016, 12:01 AM   #3
NeilD
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Hi,

It sounds like a brilliant opportunity. From what you have said you have done some of the foundation work and have got your product off the ground.

My advice would be to seek some serious professional advice.

As Diane has said there are many ways to value a business and from your point of view you need to look at a method that is going to bring in the best result for you.

It can also be a bit tricky given that your product is in growth mode and you will likely want to get a multiple of future profits as opposed to getting a multiple of past profits.

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Old 2nd June 2017, 01:19 AM   #4
YourRetailCoach
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If your company is taken by small ones go ahead this looks like an amazing opportunity. But make sure you take serious professional advice.

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Old 2nd June 2017, 02:55 AM   #5
hicartagena
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its really a great opportunity for your business. You have to accept it. Best Luck for future

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