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might sell my appraisal business, what's it worth?

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Sanya Collins

Freshman Member
Joined
Mar 11, 2003
Hello. I have a 1 man (woman!) real estate appraisal business. I am close to retiring and thinking about selling out. From the following information, what is my business worth?

1999 gross revenue - $99,000
2000 gross revenue - $100,000
2001 gross revenue - $105,000
2002 gross revenue - $110,000

2002 expenses - $10,000
2002 net - $100,000

F F & E - $13,600

any estimates or ideas will be appreciated! Thanks, Sanya
 

EDWARD BERRY

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Arkansas
I WOULD ALMOST pay you your years gross to tell me how you only have expenses of appox $27/appraisal.

frugal in arkansas
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Sonya,

You're in the same boat as my husband is with his service business.

You are the most valuable asset in your company, so once you remove yourself the only thing left is any good will that your company name might have, your equipment and a client base that may or may not accept any new appraiser that might be willing to buy you out.
Those clients are only leads for the next guy, not bound by contract to send him or her the same volume of work that they had entrusted you with. Your present clients would owe your buyer no loyalty whatsoever. Unless he/she can immediately match or exceed the quality of your work and professionalism, those clients will turn to other appraisers in your area to service their needs.

Valuing a business like this doesn't work the same way as valuing a retail business or one that has binding contractural agreements that can be passed on to new ownership. It's higher risk and therefore less valuable to any potential buyer.

I'm trying to be nice here, so please don't be upset. :(

If you were in my 'hood and I got wind that you were considering retirement, I'd be passing out my resume to your clients at no large personal expense, not offering you money for the right to do so. Unless there is something completely unique about your appraisal business that would qualify it as an exception to what I've brought up so far, I'm certain that most appraisers would feel the same way.

On the other side of the coin, we all know that a fool and his money are soon parted. Perhaps you can find one and go out in style. My fingers are crossed for you.

Best of luck...sure wish I could retire! :wink:
 

David S. Roberson

Senior Member
Gold Supporting Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
Dee Dee,

My thoughts exactly. And Sonya, I don't want to be the bearer of bad news. I'm a one person shop too, so we're both in the same situation. With the ridiculous competition in my area, (about 20 appraisers in a market population of 60,000) I don't know if any appraisal business here is worth any more than the appraiser that works there.
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
Dee Dee took the words right out of my mouth. Most people say that figuring the value begins by deducting the cost of an employee with your qualifications. Whatever is left can be capitalized to determine the value of the business. If it would cost $100,000 per year to replace you with an employee, the "business" is worth exactly zero.

But, there are probably ways to make it pay. If you could find a trustworthy trainee who's impatient to develop good clients, you could work with them for a year or so and then turn the business over for a percentage of the gross (maybe 20% or so) plus the cost of equipment. After four or five years, the business is theirs, free and clear. There's got to be a better way than just breaking camp and leaving town, but if it's not win-win, you'll probably end up regretting it.
 
A

Anonymous

Guest
are the most valuable asset in your company, so once you remove yourself the only thing left is any good will that your company name might have, your equipment and a client base that

I would agree if I had not see a guy sell his company not once but twice.... I mean the buyers had SUCKER stamped on their forehead...$50,000 is what he got...virtually no equipment, no software, no real estate. Desk, 3,4 computers and client list...did not even have to sign a non-compete clause.

In both cases the buyers were CRs who had worked about 6 mo. or 1 year....let me repeat that. They had LESS THAN ONE YEARS EXPERIENCE..and how you say could that Be?? I cannot prove it. I think they were brought aboard and their experience log was made up by the seller. He helped them get "into" the biz, he "covered" for a year+ reports they did not do. I mean these guys popped up overnight, and suddenly they were SL or CR. I know at least 3 of these overnight sensations that I would bet was working 48 hr/wk. in McDonalds during the year they claim 2000 Hr. of experience.

As for good ole "Seller" - he once went into a bank client of mine and visited with the Pres. Told him that whatever figure he needed he could deliver it.....Aaron politely thanked him and when he was gone he gathered his loan staff and said, "Don't ever let me catch one of that guy's appraisals in your loan file." (my kinda banker)

I read a rule of thumb once that said a professional service is worth about 1/4 or 1/3 the annual gross plus real estate value. And it is invariably worth less within 6 mo. of sale.
 
B

Bemis Pownall

Guest
A long time ago a friend of mine bought the business from one of my mentors.

I took the other course and found my own niche. We've remained dead even(volume) for the most part.

For years he had to pay the old owner 5% of proceeds. Not me.
What did he buy? A name, a client list, some phone numbers, a reputation, some really old computers, out dated software.
His current client list has none of the original clients from the original business.

Whats an appraisal biz worth in this market???......Not much.IMHO
Buying an appraisal business gives a young appraiser a head start but thats about it. If you can peddle it go for it!
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
The only way you can really sell a business is to stay with the business as a consultant and front person for at least 1 year and maybe 2 until the clients are comfortable with the new person and the change in name (if necessary) which removes your name from the business (from Sayna's Appraisal Service to Anytown Appraisal Service). You are going to have to deal with new DBAs, etc. Once you get out of the business, the value would be no more than 1 year's net. The problem is that an appraisal business can lose its clientel very fast. I saw a commercial firm that sold for $1M go to a value of $0 in less than 2 years. The seller had to foreclose on the note just to get his business name back as he sold it along with the business.

Roger
 

TC

Elite Member
Gold Supporting Member
Joined
Jan 31, 2002
Professional Status
Certified Residential Appraiser
State
Pennsylvania
It's worth zilch. Why would anyone pay you for work that they could pick up by calling your clients after you quit?

TC
 

Tim Hicks (Texas)

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Texas
I think everybody pretty well summed it up. I can't see how any appraiser could sell their business unless they were planning on staying on as a figurehead. But, If anybody is interested in paying top dollar for my business, give me a call. I could just open up under a different name next week. :twisted:
 
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