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Rakhi Vasavada
Rakhi Vasavada, Financial Advisor
Category: Finance
Satisfied Customers: 4545
Experience:  Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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I am a director of a small engineering company. I need to work

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I am a director of a small engineering company. I need to work out a valuation of the companys worth as I hope to retire soon due to ill health. The company has three other directors who are prepared to buy my share of the company, providing a figure can be reached.
The company was founded in 1986 I have access to the last 5 years accounts.
Submitted: 1 year ago.
Category: Finance
Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,Hello and welcome. Thank you providing an opportunity to assist you.Though I may not be able to arrive at a precise value for you, I can certainly give an idea as to how you should go about it. The most and widely used technique is to use a multiplier method by making your current earnings as a base.Having said this, if you intend to go in this direction, this multiplier based method is based on the earnings a buyer will be able to extract from the business before interest, tax, depreciation and amortisation (EBITDA). The valuation of the business is therefore a function of the EBITDA and a multiplier.The multiplier used depends on both the industry sector and the size of the business being valued: the larger the business turnover, the higher the multiple. For example, and as a very rough guide, the multipliers for a typical professional services business range from 1.0 to 1.9 for one with an annual turnover of less than £400,000 to 6.0 to 8.0 for one with an annual turnover of £5 million to £10 million. I am sure this would help.You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.Warm Regards
Rakhi Vasavada and other Finance Specialists are ready to help you
Customer: replied 1 year ago.
Or if you prefer it my number is *****
Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,hello again. Sure, and if you need, you may continue with your conversation here at any time, any moment convenient to you.It was total pleasure assisting you.Warm Regards,
Customer: replied 1 year ago.
Thanks, ***** ***** available to talk now? an if so can I have your phone number or would you rather call me?
Expert:  Rakhi Vasavada replied 1 year ago.
Dear Friend,We are only allowed to communicate through this given platform as I am bound by Terms of Service Agreement with JustAnswer.So, this is the only way we can communicate. I hope you understand.I will be available here for further communication for as many times you need.Warm Regards,
Customer: replied 1 year ago.
OK, here are my thoughts regarding the value of my business. In 2014 we had a turnover of £702,769 with a gross profit of £281,593 and a net profit of £135,153.
In 2015 turnover was £908,674 with a gross of £249,431 and a net of £98,184
For 2016 I estimate turnover to be around £1000,000 with a gross of £260,000 and a net of £120,000.
We are in the mechanical engineering / mantainance sector, and have been trading since 1986. The company has four directors, all with an equal 25% each.
I have heard that if i multiply the 2016 net profit by 3, and the 2015 profit by 2, and 2014 by 1, then divide by 6 this will give me a weighted average of £115,253.50. Is this a reasonable way to reach a figure?
Also in 2015 (these are the most up to date figures I have at the moment) the company had tangible assets of £270,798 and intangibles of £146,276. How do I cash in these assets?
Expert:  Rakhi Vasavada replied 1 year ago.
Hello and welcome again.Let me take you to a more conservative idea. Let us average your last 3 years of gross profit. That would work out as 281,593 +249,431 and + (2016 expected gross profit) 260,000 / 3. This would work out to 263,374. Now, to this, if we apply the multiple of 1.5, (as against industry practice of anywhere between 1 to 1.9), it would result into 395,061. Now, you have 25% share. So, a indicative figure should work out as 25% of 395061 = 98,765. NOTE THAT, I have calculated this on a conservative side. Therefore, it confirms that you have potential scope for upside negotiation by nearly 15-20% of this ballpark figure. Therefore, your consideration of 115,000 is fairly correct. So far as the cashing of the asset goes, if you follow the aforementioned method of calculation, then all the assets, tangible and intangible, will not come into picture. Your share will be valued and you would be paid for, and thats all.If you want to take the asset based valuation method, only then cashing out of these assets will come into picture, if I understand your situation correctly. However, such methods tend to return slightly lower valuations.I hope this helps. Please feel free to revert at any moment if you need further help. I would be more than happy to keep assisting you. Warm Regards,
Customer: replied 1 year ago.
Hello again, and thanks for your reply. It I have any further questions I will definitely use your services again.Best regards Alan.
Expert:  Rakhi Vasavada replied 1 year ago.
Dear Alan, Certainly. You are most welcome, any moment! It is always a pleasure interacting with you.Warm Regards,