If it’s a machine shop, the answer has typically been, “a business is worth the value of its physical assets, plus receivables less payables.” But the dynamic appears to be changing as the demand for American produced goods increases. I see companies paying for goodwill, but even more for the fluid organization of skills visible in seasoned viable businesses.
Customers are transferable if the manufacturing skills can be proven and maintained. When new operators come in and fire everybody and then try to hire people back for less money, they are courting disaster. Even if the judgment they make is that the previous management was a bunch of bozos, adding layers of chaos to the existing complexities of revolving ownership is arrogant and dumb. Usually old companies in manufacturing do not fail because the workers were paid too much, but because they were unmotivated and poorly managed. If workers understand the expectations of the owners and know the negative consequences of not meeting them they will generally produce.
I talk to auctioneers who look at lots of deals of machining firms and they tell me that few viable companies sell for asset value these days. In 2012, a skilled workforce and motivated management team has real value – not Silicon Valley kind of numbers, but significantly more than two years ago – before the world started to turn.
Question: Do you think gay marriage should be legal throughout the United States?