Message-ID: <39BFF452.B33897DB@bellsouth.net>
From: John De Armond
Newsgroups: rec.crafts.glass
Subject: Re: sell glass shop ?
Date: Wed, 13 Sep 2000 17:40:34 -0400

KZ man wrote:

> I am a 1 man stained glass shop at www.genesisglass.com and here is the
> question. I know this one is hard to answer but I have a very interested
> individual who would like to buy out my shop and open as a new store in a
> larger town where the stained glass would be only 1 element of the big
> picture . Being your own boss has some benefits but if given the chance many
> would probably like the security of a weekly paycheck. How do you really
> arrive at what the business is worth only as a business and not real estate
> but as supplies etc . Which would include web site and equipment to go to
> art shows etc and displays etc.

That's kinda like asking how do you appraise a house?  It's
complicated and subjective.  Being in the process of selling my
restaurant, I immersed in this.

Setting the value of your inventory and equipment is fairly
straightforward.  Most buyers will want to depreciate the value of
the capital equipment and discount the value of inventory.  Of
course, you want replacement cost for the equipment and full retail
for the inventory.

Then there's perhaps the most valuable commodity for a sole
practitioner such as yourself - blue sky, or as sometimes called,
"good will".  In other words how much is your reputation worth?
It's difficult to set a price on blue sky.  It's usually used as a
leverage tool in the negotiations.  In a long established business I
sold a few years ago, we agreed that the blue sky was worth at least
as much as the other assets and so doubled the selling price.  The
problem with setting a value to blue sky in a single practitioner
firm is that the blue sky (you) will walk out the door when you
leave.

Another method of setting the value of the business, is to set the
price as a multiple of annual gross revenue.  This works best on
high profit enterprises.  It's hard to sell a buyer on this formula
if your net profit is in the single digit range where ROI would take
decades.

I highly recommend hiring a certified and licensed commercial real
estate appraiser who is experienced in valuing small businesses.
Expect to pay a percentage of the appraised price in fees - seems
like the fees on my last business valued at $0.5 million was around
a thousand bux.  There are standardized appraisal procedures that
the appraiser will use.  This is money well spent.


> Does anyone have the experience of selling out being a 1 man shop and going
> to work for someone else ? Has it worked out ? Any ideas ?

I couldn't imagine doing that.  They think that they can do it
better than you so that means that there will be changes that you
probably won't like too much.  Being the boss is half the reward of
being self-employed.  I couldn't imagine having to conform the way I
do things to some pimply faced fresh out of college MBA!  Can you?

>
> Or do I keep all the stuff and inventory etc and just pay rent at their
> outlet ?

I can't imagine that working either.  Ignoring the very complex
liability issues involved, collocating with a corporate store will
force you to lose some or a lot of your individual identity.  Many
people are likely to believe that you've sold out to the corporate
store and will be discouraged to do business with you because of
it.  Finally, look for your overhead to go way up.  You'll be forced
by the host store to have much more expensive insurance, you'll
likely be assessed a portion of the (huge) utility bills and you'll
still have to pay rent.  From what I've heard, a lot of these places
also want a hunk of your gross revenue.

I'd either sell out cleanly or stay where I'm at.

John