Buying an existing photography business

[sponserv]

Forgive me if this topic has been discussed before. How does one value a photography business? Gross receipts? Contracts?

Will the seller genrally sign a non-compete? Just what are the assets other than the obvious equipment? Goodwill? Real estate?

[dreamcatcher23]

Plenty of ways to value a business - anything from physical assets to goodwill, so a wide range of figures can be had.

As for seller signing a non-compete, you wanna be sure of their reasons for leaving the business - if they're doing it to make a quick buck and won't sign a non-compete, steer clear. However, if they're just old / moving etc. and are happy to then it could be a good idea.

One thing to do is to try and get hold of their tax returns - you can blow hot air all day about turnover and profit margins etc. but the tax returns don't (shouldn't, certainly..) lie.

[sponserv]

Thanks DC. It seems there are not too many folks willing or able to post on this subject. Very interesting indeed.

[DDCSD]

You only posted the question 4 hours ago, give it some time. Not everyone checks every thread on POTN every minute of the day.

As dreamcatcher said, get the owner's tax returns. A business is only worth what it can bring in profit.

With that said, there is almost no chance I would buy a photography business. I might buy the gear, if I need it, but I wouldn't pay anything for the name. A photography business's success is solely based upon the efforts of the owner.

If for some reason I did think it was a good idea to buy a photography business, I would insist on a non-compete. It would be pointless to buy it without one. Without one, the previous owner could sell you the business, go down the block and open up a new storefront and send out a flier to all their former customers telling them that they have opened up a new shop.

Photography is a pretty personal business. People got to the people they like and trust. Think about it, do you go to your hospital or your doctor for a visit? I go to my doctor, and if my doctor went to work at a new hospital, I'd start going to the hospital that he's at now and not the old one with the new doctor.

[Mark1]

I would try my best to find out what the reputation of the buisness is currently. Was it good, but now the owner is ducking a moleststion charge that happened douring a shoot, and the owner selling before the crap hits the fan? He may have 5000, multi-million dollar contracts, and unlimited income, but it is all about to abruptly stop. And A "Under new management" sign will not stop it. Far fetched I know, but point still valid.

That said what is the monthly and yearly income? Repeat customers? Contracts if any? etc..etc. You will want to know every bit of the company before you sign anything.

[tracknut]

One way that's worked for me (not for a photography business) is to buy based on an "earn out". As an idea, say the guy says the business brings in $100K of revenue per year. You might arrange a deal like $10K down for the business, and then he gets 50% of all revenue for the next two years. That's just an example of course, but you get the idea. If the business doesn't do as expected, you're not out all the money. It also encourages the previous owner to stick around and help make those revenues happen for the next two years.

Dave

[LBaldwin]

Get the past taxes (fed, state and sales) for the last 5 years. Get the banking statments for the last 5 years.

Request credit reports on the owner, the business and the landlord if renting a studio space. Hire an attorney to review the financials, credit reports and past sales figures. Don;t bother with the equipment from the business count on buying your own at some point. You will need 3x the price of the business to survive the 1 year.

Existing contracts don't have any valuation either IMO, because they were dependant on the old owners ability to deliver a specific type of image so.... you may not be the same.

Really there are no good reasons to buy an exisiting business unless you have worked for that photographer or are very fammilier with his or her work.

Most folks will still want the other guy to do the shooting so...

Establish your own business and save yourself the hassle.

[tim]

Unless there's a very good reason the business name will bring you a fairly secure income I see no reason to buy an existing business. If they had a studio with a long standing customer based that might work, but you'd want some time with them there to ensure a smooth transition.

Photography's a very personal service, people basically hire a photographer, and since that's changing they're likely to look elsewhere unless you give them a good reason to stay.

[sponserv]

Thanks all! Very good points to consider. I already own a business that has all revenue dependent on me being the person bringing the unique relationships. So I guess I should have been able to answer my own question. But it never hurts to ask.

And patience has never been a virtue of mine. Sorry Derek.

[DDCSD]

And patience has never been a virtue of mine. Sorry Derek.

Just poking ya. Didn't mean to come across as short as it reads. :lol: