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Does anyone know the.

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65076507

Thread Starter
Junior Member
Joined
Jan 1, 2008
Professional Status
Certified Residential Appraiser
State
Maryland
best way to go about purchasing someone's appraisal business from them? What's the process? How to value? I am SOOOOOOOOO worried that I may buy the business and the clients go elsewhere. Please help!!!!!!!!!


Concerned Trainee
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Excellent Worry digits. Give more details on the situation so we can get a clearer picture. How big is the company, would you be taking on office space with a lease? Equipment? Client situation?
 

JT1974

Senior Member
Joined
Dec 16, 2006
Professional Status
Certified General Appraiser
State
Wisconsin
I have heard anywhere from one to two times gross revenue is a good rule of thumb for an appraisal business. Of course I've never bought an appraisal business but this is what I heard from another appraiser who did buy one. Just be sure to base your offer on next year's projected income and not the reported income from the previous "BOOM" years.

Also, I have seen instances where a National Pharmacy will come into a small town and buy out the local pharmacist's business. In these cases, the purchase price is a function of the number of customers who were converted to the national chain and have remained active customers for 6 months. I would recommend you structure your deal in a similar fashion. Perhaps XXXX amount of money down (as low as you can go) and the remainder at 6 months and possibly 12 months in one or preferable two installments. This way, the seller will have every incentive to help you "lock-in" his existing clientele for the long-haul.

The worst thing you could do is to cut a check for the business and let the owner walk away with no skin left in the game.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I agree with Jason's general advice and TJ's specific questions. Without better identifying the nature/scope of the business you are considering to purchase, there's little to add (IMNSHO) to Jason's post.

Good luck!
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Excellent post Jason.

The reason for my questions, during down periods of the business cycle you need to keep your overhead to a minimum. Many appraisal companies go under because of long term office space leases, etc. Be careful of how much overhead is involved, usually some client losses will occur, how much of a client loss could you withstand given the overhead involved.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
I am SOOOOOOOOO worried that I may buy the business and the clients go elsewhere. Please help!!!!!!!!!
First, admit to yourself that you are buying 'blue sky'. Admit also that at least 50% of your customers will go elsewhere...very likely. If you have a non-compete clause better, but I know people who moved 50 mi. away and still drew biz from old clients....so? What are you buying? Wouldn't it be just as easy to spend an equal amount to advertise?

Financing? Borrow against your REAL property? What bank would loan on your Business Enterprise Value? Owner finance? Not a fun thing.

It is a saw that a professional biz ought to sell for triple the annual gross. I think imho that paying over one-third the annual gross would be a stretch. If you gross $150,000 annual, paying over $50,000 seems to be a lose lose situation to me. Paying $450,000 is a lead pipe loser because the interest on the money at 7% will eat 50% of the net or more. I grossed $150k one year and my net taxable was still under $50,000. I know two people who bought appraisal companies (from the same guy - didn't have a non-compete clause so he moved 20 mi. N and did it again), both "trainees" and the seller signed off on their work until they certified. Both went under and the seller dropped his license under pressure from the state.
Frankly, I wouldn't pay one thin dime for the best office around my parts.
 

nauthead

Senior Member
Joined
Nov 26, 2004
Professional Status
Certified General Appraiser
State
Florida
Is the owner of the company the approved party for the clients, or is the company the approved party? If the owner is the only approved appraiser, those clients will dry up as soon as the prior owner is gone. Something to consider.
Back in 2005 a one man shop generating roughly $75,000 a year in gross income sold for $30,000 in my area. The sale included locations near the top of several internet appraisal referral sites, established fax and phone lines and client base. The seller had to sign a non compete agreement for 6 counties. But the business environment was also much stronger then.
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
the hell with the Gross Billing - a profitable business is NET COLLECTIONS that actually CLEARED your bank. Wayyyyyyy too many appraisers have no concept of sound Accounting Principles.

GROSS means nothing.

SHOW ME THE 3 YEAR COLLECTED $$$$ BUCKS and the P/L or we have nothing to discuss.

Walk away from ANYONE who won't disclose.


Prior to ANY negotiation - Hire a Tax Attorney with a CPA to ensure you may get what is stated, to determine what form of business is BEST for .............YOU.

The real buz is NOT the gross billing!


the Buz is essentially depreciated office equipment, any active marketing tools utilized, the "name", and a client list which should be SCOURED and analyzed for GROSS / NET COLLECTIONS<<<<<. Recognizing that the MAJORITY will vanish as soon as the former owner is out of the picture.

Suggest, given market conditions, put your energies and money into getting CERTIFIED AND BUILDING YOUR OWN PERSONAL REFERRAL BASE before jumping into any venture. "LOOK BEFORE YOU LEAP!"
 
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Mike Plumlee

Junior Member
Joined
Feb 21, 2007
Professional Status
Certified Residential Appraiser
State
Texas
Trainee,

You need to consider two things when buying a business:
1. What are the assets you are purchasing?
2. What is the historical profit (NET) of the company?

You need to see the actual financial statement or books for #2. Anything less than that is utterly unusable. After all is said and done, what kind of money will you make?

The worry to me is the assets. You are a Trainee. How are you going to operate a business without a supervisor/licensed appraiser? Would the supervisor work for you, the new owner? That would be awkward and untenable in my opinion.

Are the current clients (as assets) your clients or the current owner's? Be realistic. What happens to these assets if the current owner leaves? Can you sustain by gaining new clients if the old ones leave?

For every element of the business, you need to ask yourself ... is this something I absolutely must have to succeed? At some point you may figure out that you could start your own business from scratch and be better off.
 

rbrienza

Member
Joined
Sep 16, 2007
Professional Status
Certified General Appraiser
State
Colorado
As a trainee ask yourself the is the Certified General Appraiser or the Certified Residential Appraiser still going to be involved are they going to be signing/ reviewing your reports. and what will be the new split? .. You might get a book from the Appraisal Instuite on appraising a business.. afterall you are an appraiser.... use your skills ..jeti knight
 
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