FW: [Experts] How to Value a Piano Technician Business

[Bill Ballard]

At 6:42 AM -0800 1/9/03, Paul McCloud wrote:
>Friends:
>	This email was posted on the EXPERTS list.  Any business types
>care to comment?
>>My brother is a piano technician and has recently become disabled. I
>>offered to help him put a value on his business in the hope that he
>>might be able to sell it. Are there any guidelines for how to value such
>>a business?
>>
>>I am a pianist, but not a piano technician. Is there anything I should
>>know about the business itself in trying to assign a value to it?

Your first task is to find out from your brother what's up for sale 
and what isn't.

There are two kinds of assets: physical and human. Physical includes 
the real estate (if owned) which provides the necessary office and 
workshop space, as well as all the equipment therein. Human means the 
goodwill and loyalty of your brother's clients. The inventory of the 
assets for sale should not include those parts which your brother 
does not intend to part with. That might include a drill press and 
band saw for puttering around with, but more importantly the real 
estate and the business vehicle which I'd guess you brother would 
like to retain for personal use, in this post-pianowork chapter of 
his life.

The inventory of both these classes of assets is the easy part. 
Assigning value is trickier, depending as it will on the amount of 
research you're willing to do. Real estate and automobile (if 
involved) are straightforward. Tools, either general woodworking or 
specifically piano tools, can either be calculated according to 
"¢-on-the-$" from the current list prices, or inferred from want ad 
publications, either in print or on the internet. Prices for both 
these sources will tend to be high-ball "asking prices", and anything 
from the net can be guaranteed to bear no relationship to prices 
encountered in your local market (here the assets will be sold). 
"Asking prices" set high are a good strategy in some instances, but 
not when your aim is to sell your brother's business in as few chunks 
as possible (hopefully, one), and when the business offered is first 
of all manual labor (albeit, highly skilled and with its glories), 
and second relatively obscure. These two traits tend to narrow down 
the pool of prospectives for your brother's business. (On advantage 
to these modern times, which might widen the pool, is that it's no 
longer necessary to be able to hear "in-tuneness": you get to watch 
it on an electronic box.)

Wim  Blees can tell you about selling an entire business to a former 
employee, and Terry Farrell, about buying a customer list from the 
widow of a piano tuner. I recently evaluated my business informally, 
as part of a personal inventory in a divorce. As far as ¢/$ on the 
tools, I grabbed the regional weekly class ad magazine (I'm right 
between the distribution areas of the Boston and Albany editions), 
gauged the difference between these "asking prices" an the current 
list on well-known items, knocked the asking prices down by 1/3 (to 
go from "asking" to "selling"), and applied the average here to the 
entire list of tools. (Your brother may have been depreciating 
equipment for his IRS Sched C: that's an arbitrary and linear 
depreciation which may not impress a buyer as the basis for price 
he's being asked to pay. But this depreciation history is a good 
record of the initial acquisition, that price, plus the age of the 
bug ticket items in the inventory.

The customer list is by far the trickiest business to asses, based as 
it is not just on a list names that your brother is selling to a 
buyer, but more to the point, the buyer's confidence that after 
good-faith introductions are made by your brother, and the buyer has 
done his first tuning on each (and made his first impression), that 
these customers will transfer their loyalty to the buyer. Remember, 
that your bother is only selling access to these customers, they are 
the ones to determine whether they will transfer their business to 
the buyer of your brother's list.

However you evaluation your brother's business, it should be done 
with at least one thing in mind: while it should fairly reflect the 
value of what your brother wants to sell, it needs to be clearly 
visible to the buyer as fairly arrived at, ie. taking into account 
his risks especially in the area of the human assets (the mutual good 
will built up between your brother and his customers).

Bill Ballard RPT
NH Chapter, P.T.G.

"Out here on the food chain, you either
    diet,die, or dine"
     ...........folksinger Mark Graham
+++++++++++++++++++++