E2 Business Valuation?

Old Oct 11th 2016, 5:53 pm
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Default E2 Business Valuation?

Hi All,

We finally think we've found the right business for us! Of course now the pound has bombed after brexit so terrible timing I know but we have made a couple of offers which have been rejected so far. It's a high end ladies fashion boutique doing $ 125k profit with matching tax returns. Got her down to 350k inc stock of 100k. Still thinking its a lot for a boutique though! She's been going 15 years and has a lot of repeat customers but obviously we can't count on them staying once she's gone.

We were hoping to buy a business where we'd get a return in two years, not three. Also it's not a business where we are are buying a customer base, just taking over a lease and her stock really.

Any opinions on value? Has anyone experience of owning and running a boutique there?

Obviously we'd get our accountant to do DD and check stock numbers but that's if we can agree a price!

I'd just appreciate any experienced E2ers or business owners thoughts before we decide if we will go any further on this. Everyday it's costing us more with the plunging pound which isn't helping!

Thanks!
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Old Oct 11th 2016, 6:04 pm
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Default Re: E2 Business Valuation?

No experience, but might help others to know where it is....what city and state?

Rene
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Old Oct 11th 2016, 7:13 pm
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Default Re: E2 Business Valuation?

A years stock, sounds a lot.
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Old Oct 11th 2016, 7:31 pm
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Default Re: E2 Business Valuation?

Thanks, that's what she says her current stock is at cost price but we need to get that verified. Most items are $ 300 to $ 1000 in value.
She's pretty firm on her price of 350k now but that means it will take almost three years to see a return plus the bombing pound hurts us more everyday too! Starting to think we should look at other options. Somehow spending 150-200k seems less painful with the drop in the pound! Just means we won't get such a good income but we will have to see what happens. Plus we do like this and feel confident that if we get it for the right price we could improve it. My main reason to post on here about this was to get other people's thoughts on the valuation.
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Old Oct 11th 2016, 7:39 pm
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Default Re: E2 Business Valuation?

I had fringe dealings in the fashion industry, sounds like she has a lot of old stock you would have trouble shifting.
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Old Oct 11th 2016, 7:56 pm
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Default Re: E2 Business Valuation?

Yep we agree, her argument is we are buying the business because of its value and she is throwing the stock in! But we keep arguing that the business is really only worth two times net inc stock which is 250k where as she's not budging at 350k at mo. Two times net plus 100k in stock! We'd go up a bit more but are not going to pay for her old stock she can't shift, that's for sure!
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Old Oct 11th 2016, 9:36 pm
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Default Re: E2 Business Valuation?

Originally Posted by Pinkcat1771
It's a high end ladies fashion boutique...
In New York or California, that might work out well. In West Virginia, perhaps not so well. Since we don't know where the business it, it really limits the advice we can offer.

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Old Oct 12th 2016, 1:07 am
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Default Re: E2 Business Valuation?

Originally Posted by Boiler
.... sounds like she has a lot of old stock you would have trouble shifting.
That is a facet of what I was thinking too. The shelf life of stock in a fashion boutique is likely to be very short, very short indeed. I wouldn't attribute any value to anything that had been in stock for more than three months, and probably write down the value of anything held in stock for two months by 50%. For example, we are now well into autumn, so any "fall fashions" should have already sold as customers will be shopping for winter by now.
Originally Posted by ian-mstm
In New York or California, that might work out well. In West Virginia, perhaps not so well. ....
Maybe, maybe not. The competition in NY or California is likely to be brutal, whereas in Podunk, Tennessee, you might be the only shop in town for swanky fashions, which may, or may not, be a good thing.

Last edited by Pulaski; Oct 12th 2016 at 1:12 am.
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Old Oct 12th 2016, 7:08 am
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Default Re: E2 Business Valuation?

Thanks, yep we were going to say we won't pay for any stock older than three months but I like your ideas. It's in South Florida.
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Old Oct 12th 2016, 8:47 am
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Default Re: E2 Business Valuation?

She has three W2s, two part time and one full time manager.
Tax returns all match reported cash flow which is a miracle there! So many don't seem to! So that is good.
Our main concern is her asking price and why we should pay for all her stock, I'm certainly not going to pay for anything older than three months!
Brexit is making things harder too with the diving pound!
Still undecided whether to up our offer or walk away and find something else!
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