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Old 09-28-2016, 01:46 PM   #3
Sean J Hunter
Member Sean J Hunter is offline
 
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Join Date: Apr 2009
Location: North Shore  New Zealand
Posts: 804
Re: Possibly buying an existing box

Great points Alex,

It's important to realise that many small companies do not take into account all real costs, and so tend to not run at a "REAL" profit, very typical in low cost of entry markets like CF. When they are valued for sale, the owner tends to find that there is little to no "REAL" EBITA (profit). Add to this a customer base that isn't particularly tied in (only month to month contracts) and the PE ratio might only be x 2 (not x 3-5).

I hate to say it but like in many CF box sales, you may find the goodwill variable in the sale price is vurtually $0.00. So instead you end up taking the equipment off the vendor at second hand or book value depreciation rate, taking the lease liability off their hands as well, they often get tied into a non compete / solisitation clause, making it difficult to go off and start again, and the owner ends up walking away with little to no actual profit from all their hard work.

Lastly as Alex pointed out, why are they only at 48 members, do you know the reason, do you think you can fix that reason? most boxes don;t start making any real profit until they reach 100 - 150 members.

HTH

S

Last edited by Sean J Hunter : 09-28-2016 at 02:21 PM.
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