posted on April 19, 2008 06:53:52 AM new
Claude, you touched briefly in my Experiment thread on how difficult it is to value a business for sale. Could you talk more about that?
Thanks,
fLufF
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Not to deflect responsibility too much, but in my case it was mostly handled by my business broker, who does valuations many times a year.
There are traditional metrics, and then there is the whole goodwill section, which is a big thing for consignment sellers and less of a factor for other eBay businesses. At the time I sold, you could look at my monthly volumes, gross profit margins, etc., but there was also the factor of the 800+ consignors I had, and the reputation I had built for honesty in town (plus the fact that so many people knew me as the father of that hockey player or that member of the string section).
My case was also somewhat special in that it mattered quite a bit to me that the next owner would succeed. It wasn't just a business transaction for me (refer back to previous paragraph about my presence in town). Two years after I sold, I still run into people who think I own that store downtown; it would suck if someone disreputable were running it in my place.
My amateur approach to pricing was to look at what franchises charge (knowing they're a rip-off), and then doing deltas versus that. For example, what is the national name recognition they have worth? What are the 800 consignors worth? What price can we put on a lease, with improvements, networking, etc. that you would have to spend time/money getting?
To be honest, in the end, I accepted an offer where the price did not make me gag (nor did it make me dance), and I liked the buyer. I had been talking to someone else for more money, but he was on a lower rung as a human, and I opted for the better person. If the money difference were huge, I don't know what I would have done, but thankfully I didn't have to confront that problem.
posted on April 19, 2008 07:34:19 AM new
PS I want to emphasize that a consignment business is LOCAL, and what matters most is local reputation, local advertising, etc.
There's the whole global component that enters into consignment also, just as for any eBay business. With the new eBay emphasis heading towards "what's the buyer experience been in the past month?," that's less of a factor than it was when your cumulative feedback was the main driver.
