is there a forumula for this?

  edennorman 22:29 18 Jan 2006
Locked

Hello

I hope it's ok to post this question here, it's just that this is abouy a purchase, and it is directly concerned with things PC, anyway I hope you can help me.

I am thinking of making an offer for an established "business" if you can call it that.

It is just a website selling various e-books (electronic books)

He claims to have attained a sustainable profit of about £100.00 a week.

Now of course this in iteself is very small beer indeed.

But I have been looking for an entrance into this particualr area for some time, it will tie in very nicely with the website I have in mind that is going to concentrate on Electronic Publishing, every printer I have spoken to walks in dread of the e-book.

No distribution costs...extremely low replication costs etc

So I want to make this person a very serious offer.

The problem is...I don't know what to offer him.

Is there a business formula when it comes to purchasing a business?

Such as the offer is based upon a percentage of the profits of the business after overheads have been deducted?

I just wondered if there was some way...based upon established business practice, that I could arrive at a reasonable offer?

Thank you for any advice

Richard

  ade.h 22:34 18 Jan 2006

My advice would be to talk to a good business advisor or business lawyer in your area. More than one if at all possible.

There isn't really a formula for it. There are - to varying degrees - tangible assets of course, such as a customer base, good turnover, stock or premises. Even an established web presence. Also less tangible assets such as company image/reputation/pedigree.

  Forum Editor 23:17 18 Jan 2006

before you take any steps with regard to offering money. Claiming to have attained a sustainable profit is one thing - demonstrating it with facts and figures is another, and a sustainable profit will only be a profit if someone works to sustain it.

If I had a site that made me £100 sustainable profit every week I wouldn't be selling it, I would be developing it into a site that made me £1000 a week.

Ask this person for evidence of the profits, and then talk to an accountant.

  ade.h 23:21 18 Jan 2006

You know, since my father is an accountant, it was remiss of me not to include them too!

  spuds 00:43 19 Jan 2006

There are quite a number of people selling the likes of e-books. Check eBay for a good idea as to the way they function.

Take into consideration that some of the e-books may have copyrights, and any profit margins made need to be adjusted to cover for royalty payments.Ask the seller if they are paying royalty payment on the material being used. This should give you another idea as to the true worth of the business.

  €dstowe 10:39 19 Jan 2006

As spuds says, there are a number of people doing this so, bandwagon comes to mind.

Unless you have a unique selling point, you will just be one of an ever increasing number of people vainly hoping (and most likely failing) to make their dreams come true.

£100/wk is not sustainable unless you work at it - you won't get it by sitting back in your chair waiting for the echeques to arrive. If you can make £100/wk, work at it to make £1,000/wk as FE says.

  €dstowe 10:41 19 Jan 2006

I would also find out why the seller wants to sell and why he, himself, is not working to increase sales and profitability. It's not because he's going to start another, similar business to sell, is it?

  spuds 11:56 19 Jan 2006

Going on what €dstowe suggests, and my reference to eBay. I bid for and won an e-book business on eBay a few months ago. The 'business' consisted of a couple of cd's with numerous content items, covering a good range of material like diy,martial arts,glamour, you name it, it was most likely there.The seller gave me the rights (with a nice little certificate) to produce my own copies and resell to who I liked. I got all that for a winning bid of £1.25 plus £1.75 postage charge. So for the sake of curiosity, the 'business' cost me the grand total of £3.00.

I do not intend to use this e-book 'business',but I am sure, that should I wish to use the contents of the cd's,then I could easily re-cooperate my expenditures, and perhaps make a nice profit. But due to the fact of what I mentioned previously, and Copyright Laws,I will not venture any further with my e-book business.

  edennorman 11:57 19 Jan 2006

Thank you

For your comments, very useful.

The person says he is exiting the market to concentrate his efforts in other directions on the web, he feels he has gone as far as he can do with his site....may be true of course.

He has supplied me with evidence in the from of an unedited paypal account, which shows an income approximating his claim.

I have sent this to my accountant, I feel I should be asking a lot more from this person in the way of evidence to support his claims, what do you thinl?

Thank you

Richard

  ade.h 13:03 19 Jan 2006

If your accountant is on the ball, he will expect a lot more evidence to come his way before he recommends that you go ahead. A set of accounts springs to mind....

And if this guy doesn't have that, walk away from it.

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