Selling or Buying a Small Business/How Much Can I Sell My Business For?
I'm curious how much I could sell my business for. I've never done this before, so I'm not sure which information is required, but here are some details about my business:
- We're in Toronto, Ontario, Canada
- It's a personal fitness training business. We help clients lose weight, gain muscle, etc.
- We're currently doing about $140,000/year in personal training sales, and of that, about $92,000 is profit.
- We have a website that is pulling in about 6-8 leads per month
- There are systems and operations, so if someone was to take over the business, they could hit the ground running.
I don't know if this is enough information, but based on what I have, what do you think my business could sell for?
Hello, and thank you for contacting AllExperts.
There are several other facts about the business that are helpful for establishing a value, but I can at least give you an idea of some value ranges based on the information you sent. This should serve your purposes at the moment because to obtain a paid, written evaluation can be upwards of $1,000. Unless you are involved in some legal issue, and are only interested in the possibility of a sale, you probably do not need a more elaborate valuation. There may also be a slight difference, if any, between values in Canada and the US.
In general, you have a business with a specialized individual training, which is being a personal trainer. I do not know if that is only you, the owner, or if there is a staff of personal trainers, which can affect value, as well as how many years you have been in business with similar revenues and profit. In other words, if your profit was $92,000 for only one year, that does not carry as much value as 5 years of that same profit. For the time being, I will downplay these specifics to give you an approximate value range. Any business requiring special personal licenses can have lower values than those without because in your case, relatively few buyers are certified personal trainers. So, your audience of buyers is smaller, and the skill and certification is needed to continue the business as it is. It is why I mentioned if you have a staff of personal trainers, then anyone can buy and operate the business, increasing your audience and appeal. If you are the only personal trainer, as the owner, then only someone with the same skills as you can buy and operate it. Also, in the case of a personal service of this type, often your clients do not want to switch to another person because of the closer relationship than in other types of businesses. So, buyers tend to be cautious about paying for a clientele that may not all stay with the business. Often some amount of the price will be held by a third party( in the States it would be an escrow office) for some designated number of months and dispersed to the seller based on the number of clients who have remained with the business.
The single most important factor in the value is the amount of profit, and how consistent it is. If you did not produce something close to $92,000 more than one year, then not only would the value be less but the business is not as marketable. In other words, buyers do not necessarily see a year-old business as having an established profit, so it can be more difficult to sell, and at not as high a price.
Regarding value, and researching other similar businesses on the market currently, and those that have sold, a reasonable asking price might be in the 2x profit range, or about $200,000 if you have a few years profit in the same range. Normally, I would take a 3-year profit average with more weight being put on the most recent year. So, a worst case would be that you as the owner are the only personal trainer, and you only have one year of profit at $92,000. That could dramatically lower the value to about half, or $100,000. Businesses are not normally valued according to total revenue because you can have two like businesses side by side, each with the same revenue but one has much higher expenses and lower profit, and profit is the most important factor---the amount of profit and how consistent it is year to year. .
Valuing a business is not particularly easy or simple, and as I said, requires more information. The longer you have been in business, and the longer you have made a certain profit, and the less the business depends on you as the owner......the more it increases value. On the other hand, if you have been in business a short time, with an inconsistent profit or for only one year, and if you are the key to the business in terms of your importance and specialized skills or certifications, then the value is much lower.
My best advice would be to contact a local business broker in your area who can talk in greater depth with you about the business, and also see the operation. That person should also be familiar with the local market, and have some idea of how competitive it is, and what the demand from buyers is for this type business. All of these things are important to look at.
Best to you in whatever direction you take.
Senior Broker & Intermediary