What's my lab worth???

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CUSTOMCHOPPERS

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A local lab to me has recently showed interest in buying me out and having me manage their lab. I am waiting for their offer but really don't even know the ballpark of what it's worth. I am a 3 person C&B lab doing about $38,000 per month. I'm having a hard time finding out a solid number or even a formula to figure out a labs value. Any help would be appreciated.
 
CoolHandLuke

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can you consistently make that number, can you show your growth if you used a calculator, and can you project that over the next 3-5 years?

thats your value in an annual figure, which a prospective buyer would want to bid on to make that profit, keep you as a retainer, and earn the same growth.

the onus is on you to forecast, the onus is on them to come up with a buyout, and the onus will then be on you to earn those targets. sound like fun?
 
Jason D

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A local lab to me has recently showed interest in buying me out and having me manage their lab. I am waiting for their offer but really don't even know the ballpark of what it's worth. I am a 3 person C&B lab doing about $38,000 per month. I'm having a hard time finding out a solid number or even a formula to figure out a labs value. Any help would be appreciated.
A lab of your size represents a challenge to value.
Standard valuation of a lab is 3-4x ebitda, scales up or down based upon size, systems, technology and succession plan.
Small labs are exceptionally hard to price because the primary value is “goodwill” which is usually tied to the owner. If the owner leaves the lab is basically worth nothing (or the sale price of the equipment at auction, usually around 20 cents on the dollar.)

From your perspective you should look at two things, and you have to be brutally honest (or get an unbiased expert to look at it and give you an opinion, because we all think our own kids are beautiful lol)

1: what is the viability of you lab over the next decade (or however long you would expect to keep running it) this is a function of: market position relative to the trends in the industry-locally and nationally, leveraged debt, technology, competitors etc.

2: how much can you earn over that time, with the level of commitment you expect to deliver, as an owner vs as an employee plus buyout.
 
rkm rdt

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A local lab to me has recently showed interest in buying me out and having me manage their lab. I am waiting for their offer but really don't even know the ballpark of what it's worth. I am a 3 person C&B lab doing about $38,000 per month. I'm having a hard time finding out a solid number or even a formula to figure out a labs value. Any help would be appreciated.
38kx12= 456K

start there.
 
Jason D

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38kx12= 456K

start there.
I don’t know anyone who will pay gross for a 3 person lab in this day and age, unless that lab has a specific product, property (intellectual or real) or access that is otherwise unavailable.

In the 1990’s sure but 2018?
 
rkm rdt

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You don't have to "know anyone".
When the OP gets an offer he can compare it to my formula and work towards the middle.
 
Jason D

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You don't have to "know anyone".
When the OP gets an offer he can compare it to my formula and work towards the middle.
I find that most small lab owners who consider selling go through an experience similar to the guests on “shark tank”.

They use a relatively inaccurate way of devising a value and then are upset/let down/ offended at the offers they get.

I would much rather someone go in with their eyes open about relative values and, if they can negotiate a better deal then more power to them.

But to arbitrarily tell someone a number like that without some facts about their company is usually setting them up for disappointment.

Knowing how values are determined also equips the prospective seller to position their company to make the most of the opportunity.
 
CatamountRob

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What are the job responsibilities of the other 2 people in your employ? Can they take cases from start to finish if you aren’t there?
 
rkm rdt

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Good luck CC,

don't listen to Mr. Wonderful.
 
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$1000000000.00 question.... Are you selling a lab or a job? (If you are not there will it survive?)
 
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What are the job responsibilities of the other 2 people in your employ? Can they take cases from start to finish if you aren’t there?

I have a Ceramist and a model tech/scanner and I design,mill and everything in between.
 
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CUSTOMCHOPPERS

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I find that most small lab owners who consider selling go through an experience similar to the guests on “shark tank”.

They use a relatively inaccurate way of devising a value and then are upset/let down/ offended at the offers they get.

I would much rather someone go in with their eyes open about relative values and, if they can negotiate a better deal then more power to them.

But to arbitrarily tell someone a number like that without some facts about their company is usually setting them up for disappointment.

Knowing how values are determined also equips the prospective seller to position their company to make the most of the opportunity.

The Shark Tank comment hit home. I think I started out with a unrealistic value but I don't want to sell myself short either. Thanks for the input.
 
JMN

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@CUSTOMCHOPPERS , just a thought that I want to make sure you've had. You will be a manager, but not the owner. So your current freedom to decide will be impinged by other decisions you have not made. Sometime this is a stark difference, sometimes it's unnoticeable, but it will be different.
 
Wade Bognuda

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They may be trying to put you out of business and leave you unemployed and without equipment in order to secure your account base. Happens all too frequently.
 
TheLabGuy

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I had a similar thing happen to me about five years ago. Built a nice size lab (5+) folks, doing some stellar work out of it I might add...lol The offer was, 750K and that included myself and employees, with moving costs etc...only hiccup was it was out of state. Not all the employees wanted to move so we squashed the deal. I think in this situation, the offer isn't just for your business/equipment/accounts, but ALSO FOR YOU!!! That right there is a huge value and works in your favor...he/she wants you bad!!! Bad enough to buy your business, depending on the move, stipulations, the price...it doesn't cost anything to listen. Just remember, if you pull the trigger on this deal you are not 'the man' anymore, he/she is!!!
 
PCDL

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Are they buying all the assets? Receivables, equipment, etc?? Do they intend on rolling in your other 3 people, or is this a move to buy competition and keep you on to not reopen another lab?

EBITDA is King nowadays to a smart buyer. Find out how much profit you made on that 450k.

Most people don't run their business with an eye towards selling it. Myself included, which only hurts you when you sit at the table .if you are considering selling, you should get some financial help, and run your business in a manner that maximizes profits for 3-5 years to make the books look good .
 
Gru

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Quite a number of years ago some guy from a holding company (maybe DSG-can't recall) called and asked about buying my lab. His interest vanished when he learned that without me there was no lab. He didn't really care about equipment, employees or even my account base. It had to be a package, but I would essentially be an employee, so no go. Years later, I get that.

If they are trying to buy out competition, fine, make it worth your while!
 
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