odd question

I wasn’t sure where to go with this question so I decided to start at the top.

My 45 year old son has his own design/furniture business and had designed a very high end sink with special material (CSTE quartz) that has grown from 0 revenue 3 years ago to $250,000.00 as of the end of October.

The sink material maker’s ex-CEO (wealthy, young and now retired) admires my son’s creativity and has approached him with a partnership concept that would require my son to sell his sink line to the company, develop and add to that line other bathroom fixtures and expand distribution, eventually going international.

My son is interested in the concept since, even though he can successfully continue plugging along on his own, he feels with some money to expand the product line, distribution outlets and do some marketing, he could generate much higher revenues. What he has accomplished so far has been done with little to no advertising. In fact, he is a week away from launching a new, fancy website.

One problem is he doesn’t know how to value his company which must be done in order to calculate part of the value he brings to the partnership; what metric to use; 2 x revenue or some multiple of gross profit, etc. This is important as the determined value will decide the amount that each partner will match with cash, each then receiving 1/3rd ownership.

Does anyone know what would be a good and fair metric to use to evaluate a consumer staples small business? His gross profit margin runs between 55% and 60%. and his sales for the last 3 years have been $100K, $150K and $250K (with this last year being only 10 months).

Thanks and hey, Fool on!
PS I got caught in a hurricane and am just now approaching ground level

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John Sergeant can possibly help you. He use to run his own consulting firm. May be PM via the Stock Advisor options board.


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Thanks Anirban,

And also thanks for those great write ups. You are the best. I wish I could do what you do.