Buying/selling an appraisal business--value?

[KeyWhiz]

I will be purchasing the firm I work at from the wife of the previous owner (who is recently deceased.) Has anyone purchased or sold an appraisal business? Is there a simple formula for determining the value of the business?

The business has been in operation for 17 years. Essentially I will be purchasing the office fixtures and client relations (such as they would still exist as so many accounts are established under the former owners name, license and resume.)

 

[Ray Miller]

I will be purchasing the firm I work at from the wife of the previous owner (who is recently deceased.) Has anyone purchased or sold an appraisal business? Is there a simple formula for determining the value of the business?

The business has been in operation for 17 years. Essentially I will be purchasing the office fixtures and client relations (such as they would still exist as so many accounts are established under the former owners name, license and resume.)

Not much value in a single person operation. Personal property, RE if any, fixtures.

If it were a large appraisal business with several long term appraisers then the name might have some value.

Its sort of like the farrier business I had for over 40 years, no buyers. The people were using me for my knowledge and skills, they didn't want an unproven farrier messing with thier horses.

 

[Mark A Rewbury]

What's the current gross? Formulas only apply to large business. I wouldn't pay them anything up front except maybe 3% of gross for the first year. Something along those lines. If it fails no 3% anymore and no money out of pocket. I tried to buy a business some time ago. He wanted $65,000. One man operation with a gross of $240,000. I said I would do a percentage formula over a three year period. He wanted the money upfront so I walked. He's now out of business.

 

[REM sleep]

is it worth it?

true what the other guys said. what are you really buying. I had someone interested in buying my business for the direct lender retail lists I was on - Chase, Wamu, Greenpoint, Option One/H & R Block, and American Home to name a few. They are all out of business - with the exception of Chase. My friend would have spent all that money spent and they're all gone. What would you really be buying.

It's not my nature to be cynical, but with the current climate in our industry the clients you would be purchasing could be gone tomorrow.

I lost four major banks to closings and chase has me in limbo because I worked for their B/C arm - which is closed. They tell me I have to find my way back into their company via local brnaches - effectively - no more work from Chase.

Now, I am looking to get back in the hunt and Brokers are on their way out and I have to sign up with AMC's to get crumbs. What the hell happened to this business????

So, no don't buy an existing business.

 

[LACKLAND27]

I will be purchasing the firm I work at from the wife of the previous owner (who is recently deceased.) Has anyone purchased or sold an appraisal business? Is there a simple formula for determining the value of the business?

The business has been in operation for 17 years. Essentially I will be purchasing the office fixtures and client relations (such as they would still exist as so many accounts are established under the former owners name, license and resume.)

If you are dead set on buying the business, I would recommend making the widow a partner and/or paying her a % of the yearly gross or preferably the yearly Net for X yrs. Paying upfront in this climate is crazy. The current clients could be gone in a flash and then you payed for nothing.

Hey I have some shares of Enron, Pan Am and Indy Mac I could sell you. :new_all_coholic:

 

[ockyappraiser]

Many years ago, I worked as a business broker in the broadcast industry with buyers and sellers of radio and TV stations. There are many "formulas" for establishing a value: percentage of gross; value of the assets; discounted cash flow; leading/trailing figures, etc.

The problem in the appraisal business is that the customers are buying the services of a specific appraiser. Let's say that the current owner has developed relationships and friendships and a book of business. They are using "her". . .not the business. Let's then say you buy the "business" and they don't like you: you "come in low", you "raise too many problems". . .(you know the complaints). All of a sudden, they drop you and you are stuck with the note.

Bottom line here: service businesses that are one or two person based have a value only to that person. . .there is no "good will" to be sold. . only assets.

 

[Dan/Fla]

I do know some one who bought a business. For X dollars and the worst mistake of his life. Though I am not planning to buy any appraisal business we talked after the fact and brain storm what would be a different way. Location and office equipment. Go to used office supply store or Craig list to determine that value.

Then as far as the Good well client etc. Something like if you though it is worth X instead maybe upfront 10% of X and then 10% or what ever number of the monthly gross only from every active client the business has at the time you buy it for lets say 18 to 24 months (list all those client’s names on the contract). Let the wife come in and check your books to confirm you are honest. Because he lost many of those clients he started with. Remember the wife may like a monthly income and the long the business goes without an owner or someone working it the less value & clients it has

 

[Deadbusiness]

What's to buy?

If it's a one man show(being only you), make a deal with her to pay her a cut from the client list (like an AMC arrangement but with less phone calls and stips). Keep 100% of the fee for clients you bring. Work from home. There is really nothing to purchase.

I have only 1 client that I started with and have added some and lost some along the way. Taking a 2 year window for my operation, I could have sold you my business w/ 18 decent clients but you would have only 2 of them today. I have added some along the way and that is something you are going to have to do anyway so it's propably better to do it for yourself from the get go. It's amazing how easily it is to lose clients when you are perceived as being too conservative.

 

[Mike Kennedy]

Comment 1: unless you are already approved by the former Owners' clients - they should be considered by you as Prospective Customers absolutely NO different than "strangers".

Comment 2: a practice which generates $200k Gross Billing with 50% in outstanding Receivables is a $100k practice. Consider it for what it IS...... any OFFER/ $$$ Price MUST be based on what the last 3 years generated in CLEARED Gross (Pre-tax)Collections - NOT GROSS BILLING. (make certain you review the AGING of outstanding receivables).

Comment 3: along with the POSSIBLE "good will" entre' to existing clients comes the
potential liabilities if the business is incorporated. CONSULT an Attorney prior to making ANY offer.

Comment 4: require YOUR Tax Accountant/CPA have the opportunity to thoroughly review the "books".

Comment 5: Consider comment 1 above .........several times. The "urgency" to transfer the business to you is the Sellers' - NOT YOURS.

 

[Frederick]

Times are too volatile and the future uncertain. I would not base any deal on past revenue figures. If I were to base it on a percent of future gross I would want a bulletproof method of accounting that would not put me in jeopardy for litigation in the future by the widow when the inevitable decline in volume occurs. Overall I think it is a bad idea.