As I will perhaps mention many times on this site, I continue to be amazed by the number of different industries and businesses that operate in the commercial sector. I’m often asked as a broker or as a valuer, “Have you Sold/Valued a specific type of business before?” In cases such as this metallurgical business, my response was, “No, but no two businesses are alike, and my role as a valuer (or broker) is to complete the required research in order to gain information and knowledgeto assess the business as it would be sold in the active market.”
I was engaged to value the business as my report was to be used in a marriage separation. The business was owned and operated by the husband, who had been working in the industry for thirty-nine years. The business had no staff and was run and operated by the owner himself.
Throughout my research into the business, it became obvious that the owner had developed a very particular relationship with his clients who were based all over the world. These relationships with clients whilst was strong, the agreements were best described as ‘loose’. Thus in the event that the business was sold, it would be unlikely that these agreements and relationships would to be passed on automatically to a new owner.
The metallurgical industry requires a specific skill set, and given that this was a one man business it was very unlikely that this business would have appealed to an investor. The financial barriers for entry in a consulting business such as this were low and in addition the economic factors surrounding the industry at the time would not present a very attractive proposition.
Whilst the financial performance of this business was satisfactory to the retiring age owner, it would have not been substantial enough to encourage someone to travel the world to re-connect all the relationships the previous owner had established with his clients.
These were just few of the main points that suggested to me overwhelmingly that the owner was in fact the business, thus as soon as the owner exited, so would the goodwill and any ‘value’ the business had.