Looking for some personal stories and advice with vendor financing. I have been very fortunate to get into a great career line and work for a great couple who has brought me up and mentored me for 7 ish years now. They are in their mid 50’s and have offered a “10 ish year vendor finance option for me to buy the business” where it “won’t cost me money out of pocket”. We are currently starting our evaluation and appraisal but I know we’re between 1.9-2.5M purchase price. When they purchased it they bought it through vendor finance also but it was worth 790k. We paid it out with the revenue from it over 3.5 years. From your experience what do you think they mean by having it appraised now, setting a price and working out some kind of long term deal like this? I’m familiar and have been researching how vendor finance often works but they are making it sound too good to be true. Any experience with this would be appreciated. Thanks!!!
Posted by Similar_Work5378
2 Comments
Businesses are valued based on the multiple of their profits after all wages and salaries and expenses. Businesses with larger profits sell for higher multiples. And certain sectors have higher multiples than others.
For your saying “3.5 years” I’m assuming they bought it at a 3.5 multiple for 790k. Which tells me it was doing around 225k in free profit.
If that same business grows to doing $300-400k per year, it’s more valuable.
What’s the sector? What’s the assets of the company?
I bought mine for less than 2.5x multiple with vendor finance included, and it was a good deal.
Ya that’s understandable. Bit of an unconventional case I think, in aviation. Low margins, high assets, high expenses, low profit in the end. Last year we did 130k profit. Majority of my rough evaluation is just the assets.