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Machine Shop and Tool Talk

How to Price a Fabricating Business?


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  #1  
Old 02-21-2018, 11:04:23 AM
Pete Spaco Pete Spaco is offline
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Default How to Price a Fabricating Business?

A friend who ran a 3 to 5 person fabrication business died recently. His wife (also a friend, of course) was fully involved in the business which has been going for about 40 years. She can keep the shop going, but would like to sell out, lock, stock and barrel, sooner or later.
The issue:
How to put a value on the equipment therein, so she can put the best possible, while reasonable, price on the whole business.
(I assume that a realtor can price the buildings and grounds).
I'm not asking this group to do the pricing, just looking for ideas as to how to go about finding someone with the experience to do the equipment evaluation and pricing job.

Pete Stanaitis
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Old 02-21-2018, 11:52:29 AM
jaw123 jaw123 is offline
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Default Re: How to Price a Fabricating Business?

Pete

What type of fabrication business is it? Machine shop? In sheet metal fabrication, the people who sell and do maintenance on the equipment can often help with the valuation of it. If this mans wife does not know who the husband was using for this, the people who worked for him may.

Value for the "business" can be difficult if you are looking to sell the business to a person looking to continue the operation. In a service industry today you are as good as your last job. I am sure someone can come up with a multiplier of earnings if this is what you are looking for.

Is there a person working who would be interested in buying it? May be the best bet if possible.

Good luck
James
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Old 02-21-2018, 12:24:44 PM
I like oldstuff I like oldstuff is offline
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Default Re: How to Price a Fabricating Business?

You'll will get many opinions on this.

Something basic to consider for valuation is,
1.5 times the annual sales plus assets at 70% value. Buildings, facility tools etc.
*The trick is to get someone to pay for it.
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Old 02-21-2018, 01:18:41 PM
ronm ronm is offline
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Default Re: How to Price a Fabricating Business?

A professional appraiser.
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Old 02-21-2018, 01:21:14 PM
Andrew Mackey Andrew Mackey is offline
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Exclamation Re: How to Price a Fabricating Business?

If they had steady customers, and plenty of work to keep employees busy, then a take over would be best. If sales were spotty, or one off work was their forte, then things get a lot harder, as income for the future owner will depend on the work he/she can get. If business is good, then sell as a whole, L,S&B. If not so good, then part out. Sell out as buildings, property, tools and tooling. Sad to say but, you never know - maybe a developer might have more interest in the property than an industrial buyer. All depends on location!

If business is good, and looks to stay so for a while, maybe an employee buyout might be best. She gets a % of total for a time to be settled (say 20% for 5 years for example), she gets her money, the workers keep their jobs, work stays steady, and life goes on - all are happy!
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Old 02-22-2018, 01:36:58 AM
cobbadog cobbadog is offline
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Default Re: How to Price a Fabricating Business?

Always a tricky question. It was mentioned earlier that maybe one or all of the Staff would purchase it and run it themselves. this has been a successful way for a couple of Companies over here and some even went on to expand and have been very successful.
A real estate agent will help with property value but a machinery auctioneer would have a good idea of the value of the equipment, as mentioned age and condition.
It would be sad if it is stripped out and sold off so the employees should consider a Co-op situation and take the leap of faith they have in their own talents and make an offer.
Hope it works out well for everyone.
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Old 02-24-2018, 11:42:44 AM
Pauls Welding Minnesota Pauls Welding Minnesota is offline
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Default Re: How to Price a Fabricating Business?

Dennis Hoff of the Hoff machinery exchange auctions in Mpls?
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