How do I value my company?

Question

Hi

I wish to propose a buy-out of my business partner and therefore need to value the company, or his 40% share.

I cannot afford solicitors and shouldn't need them as there is not a huge amount of money involved.

It is a small limited company, a service and content provider in the media industry. The company has some assets, both tangible (about £10K) and intangible, and various debts (about £5K). There are no employees and seldom profits and turnover is less than £50K.

I would like any advice (or formulae) on valuing the company for a buy-out.

I am in the UK

Answer 1

Well, you don't have a partnership agreement, you don't have accounting records.. what kind of company is this again..

Sorry, it's ok.. Small Business is where most people are in need of help sometimes. I understand.

Well, the book value of your tangible assets are 10K, you also have to add in the total amount of cash assets and intangible assets. Let's say that your total assets are worth 12k. You said you have 5k in liability to your creditors, which means that you and your partner have 12k-5k in equity; 7k in equity. 7,000x(40%)=2,800. That is how much equity you partner has claim to, assuming that you or him have not been paid salary allowances from net income, assuming that you have not been paid interest on capital balances, and assuming that the net income for any partucular year has not been divided yet.

If the profits have been divided, and should have been divided in a 1:1 ratio because you have no partnership agreement, then he has 2800+(50k/2)=27,800 in capital, less any withdrawls he made for that period.

Cash assets may include the net income you had for any prior period. You total assets are then, 12k+50k net income for the previous year. You should learn some more about accounting and partnerships before you start one next time. Feel free to e-mail me about any questions you may have. I am a CPA (Certified Public Accountant) and an Attorney, who is living in the states. I'm not familiar with UK practices, but can help you on the fundamentals which are the same.

Accountants and Lawyers can be costly, don't worry, i'm not going to bill you.. : )

If I was him though, and assuming I was a rational player, I would take no less than 27,800-(any withdrawls I made), as an offer to buy me out. If the company has been operating for some time now, I may also be asking for more, since the book value and the market value of the company have had some time to grow distant from eachother..