Quote:
Originally Posted by TangerineTan  well at 4 beds new times 7000 base and one new at 13000 and one stand up new at 9000 , to me that is That is around 45 to 50k new , yes I understand you all dont think they are worth much , but hey at half that they are worth 25k , and yes I understand they are truelly only worth what some one will give ya , but hey the bank doesnt mind that , they are sunstar beds . |
Couple of things:
1. Check the "reality" of their net. If it grosses 61K - take out 25K for rent (you said 2100/mo). This gets you to 36K.
Payroll - at $7/hour, for 70 hrs/week, including taxes, etc -- is about 30K. So now you are at $6K.
Electric is more than that. Also have phone, credit card fees, bank fees, licenses (if any), cost of lotion, cost to re-lamp, advertising,....
So -- bottom line - it is NOT making ANY money currently - it is probably running at a loss of $20K/year.
The way it LOOKS LIKE it is making money is they work the hours themselves - and don't pay themselves. So they show only 8K on the books - instead of the 30K that is realistic. The fact is - to view this as an INVESTMENT - even if you "choose" to work the hours yourself, you have to factor in a "cost". You aren't investing in an "opportunity" to now work 70 hrs/week for free just so you can say you broke even!
SO - from a "profitability of the business" valuation - it is worth $0.
2. From an "asset purchase" evalution, as you note, the equipment new is about 50K and this equipment could easily get $25K on the used market now. So from that standpoint, just paying for the value of the equipment, the lotions, front desk as well as the "value" of the buildout vs. doing yourself from scratch (even though you don't 'own' the buildout) -- you could definitely justify a selling price of $25-35K.
3. From an "opportunity" standpoint -- if you contrast this with building from scratch (assuming you would consider that), you have at least SOME "reputation", consumer awareness, data base etc. Which has a "value" -- even if hard to determine exactly what - compared to starting at ground zero. How much is that "worth"?? Well, basically it all comes down to how much MORE do you think it can make?! Because it has to start making enough to cover ALL the expenses (including payroll, even if it is just to pay yourself $7/hour) AND pay back what you give them to buy it in the first place!
To "break even" - it probably needs to be grossing more like $85K/year. To pay you back what you would pay to buy it - it should be making more like $100K/year.
If you think it can make $100K/yr rather than the current $60K - it could be a good investment. If not - walk away.