At 6:42 AM -0800 1/9/03, Paul McCloud wrote: >Friends: > This email was posted on the EXPERTS list. Any business types >care to comment? >>My brother is a piano technician and has recently become disabled. I >>offered to help him put a value on his business in the hope that he >>might be able to sell it. Are there any guidelines for how to value such >>a business? >> >>I am a pianist, but not a piano technician. Is there anything I should >>know about the business itself in trying to assign a value to it? Your first task is to find out from your brother what's up for sale and what isn't. There are two kinds of assets: physical and human. Physical includes the real estate (if owned) which provides the necessary office and workshop space, as well as all the equipment therein. Human means the goodwill and loyalty of your brother's clients. The inventory of the assets for sale should not include those parts which your brother does not intend to part with. That might include a drill press and band saw for puttering around with, but more importantly the real estate and the business vehicle which I'd guess you brother would like to retain for personal use, in this post-pianowork chapter of his life. The inventory of both these classes of assets is the easy part. Assigning value is trickier, depending as it will on the amount of research you're willing to do. Real estate and automobile (if involved) are straightforward. Tools, either general woodworking or specifically piano tools, can either be calculated according to "¢-on-the-$" from the current list prices, or inferred from want ad publications, either in print or on the internet. Prices for both these sources will tend to be high-ball "asking prices", and anything from the net can be guaranteed to bear no relationship to prices encountered in your local market (here the assets will be sold). "Asking prices" set high are a good strategy in some instances, but not when your aim is to sell your brother's business in as few chunks as possible (hopefully, one), and when the business offered is first of all manual labor (albeit, highly skilled and with its glories), and second relatively obscure. These two traits tend to narrow down the pool of prospectives for your brother's business. (On advantage to these modern times, which might widen the pool, is that it's no longer necessary to be able to hear "in-tuneness": you get to watch it on an electronic box.) Wim Blees can tell you about selling an entire business to a former employee, and Terry Farrell, about buying a customer list from the widow of a piano tuner. I recently evaluated my business informally, as part of a personal inventory in a divorce. As far as ¢/$ on the tools, I grabbed the regional weekly class ad magazine (I'm right between the distribution areas of the Boston and Albany editions), gauged the difference between these "asking prices" an the current list on well-known items, knocked the asking prices down by 1/3 (to go from "asking" to "selling"), and applied the average here to the entire list of tools. (Your brother may have been depreciating equipment for his IRS Sched C: that's an arbitrary and linear depreciation which may not impress a buyer as the basis for price he's being asked to pay. But this depreciation history is a good record of the initial acquisition, that price, plus the age of the bug ticket items in the inventory. The customer list is by far the trickiest business to asses, based as it is not just on a list names that your brother is selling to a buyer, but more to the point, the buyer's confidence that after good-faith introductions are made by your brother, and the buyer has done his first tuning on each (and made his first impression), that these customers will transfer their loyalty to the buyer. Remember, that your bother is only selling access to these customers, they are the ones to determine whether they will transfer their business to the buyer of your brother's list. However you evaluation your brother's business, it should be done with at least one thing in mind: while it should fairly reflect the value of what your brother wants to sell, it needs to be clearly visible to the buyer as fairly arrived at, ie. taking into account his risks especially in the area of the human assets (the mutual good will built up between your brother and his customers). Bill Ballard RPT NH Chapter, P.T.G. "Out here on the food chain, you either diet,die, or dine" ...........folksinger Mark Graham +++++++++++++++++++++
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