"Valuation" of a Coin Business...

lkenefic

Non-dealer type here... How are coin businesses assessed for value? Do the coins you start off with (own) enter into the valuation assessment? So at any given time (ie: valuation as collateral for a loan, paying taxes, etc...) your existing "stock" can be in flux. I'm just curious how this is done. Thanks in advance... Best, Leo

NJCoin

No different that any other business. Inventory plus other tangible assets plus goodwill less liabilities equals value. No different than a newsstand or a tech company. Why would you think it would be any different?

jmlanzaf

@NJCoin said:
No different that any other business. Inventory plus other tangible assets plus goodwill less liabilities equals value. No different than a newsstand or a tech company. Why would you think it would be any different?

It is a little different for sole proprietorships because a lot of the non-inventory value can be in the head of the owner and is non-transferable.

Cougar1978

Assets - Liabilities = Equity (value of the business).

It’s a function of the accounting equation.

Cash and Inventory (at cost) major assets of non shop coin business.

Cougar1978

Autos, equipment and real estate (shop) could be in play too.

tyler267

Fair market value of hard assets - liabilities assumed, adjusted up or down for estimated future cash flows

NJCoin

@jmlanzaf said:

@NJCoin said:
No different that any other business. Inventory plus other tangible assets plus goodwill less liabilities equals value. No different than a newsstand or a tech company. Why would you think it would be any different?

It is a little different for sole proprietorships because a lot of the non-inventory value can be in the head of the owner and is non-transferable.

So what? If it's not transferable, it's not goodwill, and it doesn't go into the calculation. What did you add by making that comment? A business is a business is a business. Doesn't matter whether it's a sole prop, LLC, partnership, C corp., whatever.

A sole prop that has no transferable value is not a business. It's just a person, like any other person, with assets and liabilities. That can also be bought and sold.

jmlanzaf

@NJCoin said:

@jmlanzaf said:

@NJCoin said:
No different that any other business. Inventory plus other tangible assets plus goodwill less liabilities equals value. No different than a newsstand or a tech company. Why would you think it would be any different?

It is a little different for sole proprietorships because a lot of the non-inventory value can be in the head of the owner and is non-transferable.

So what? If it's not transferable, it's not goodwill, and it doesn't go into the calculation. What did you add by making that comment? A business is a business is a business. Doesn't matter whether it's a sole prop, LLC, partnership, C corp., whatever.

A sole prop that has no transferable value is not a business. It's just a person, like any other person, with assets and liabilities. That can also be bought and sold.

My addition is exactly what it was. I think it's self explanatory. Perhaps not. I might have led your reactive style to focus on the incorporation. The issue meant to be the value of the single individual.

Often, coin dealerships end up being valued at nothing but inventory. That's not quite the same as most other businesses. So, as I said, it is "a little different" because it can rely so much on the value of a single individual. It was not about the nature of the incorporation but the value of the single individual to the operation.

If you don't think that's a "little different", that's fine. Although your last paragraph, after you were done scolding me, actually explained exactly why it is a "little different". So, thank you for supporting and expanding my point. It's so rare you agree with me.

Vault Box.

NJCoin

@tyler267 said:
Fair market value of hard assets - liabilities assumed, adjusted up or down for estimated future cash flows

@jmlanzaf said:

@NJCoin said:

@jmlanzaf said:

@NJCoin said:
No different that any other business. Inventory plus other tangible assets plus goodwill less liabilities equals value. No different than a newsstand or a tech company. Why would you think it would be any different?

It is a little different for sole proprietorships because a lot of the non-inventory value can be in the head of the owner and is non-transferable.

So what? If it's not transferable, it's not goodwill, and it doesn't go into the calculation. What did you add by making that comment? A business is a business is a business. Doesn't matter whether it's a sole prop, LLC, partnership, C corp., whatever.

A sole prop that has no transferable value is not a business. It's just a person, like any other person, with assets and liabilities. That can also be bought and sold.

My addition is exactly what it was. I think it's self explanatory. Perhaps not. I might have led your reactive style to focus on the incorporation. The issue meant to be the value of the single individual.

Often, coin dealerships end up being valued at nothing but inventory. That's not quite the same as most other businesses. So, as I said, it is "a little different" because it can rely so much on the value of a single individual. It was not about the nature of the incorporation but the value of the single individual to the operation.

If you don't think that's a "little different", that's fine. Although your last paragraph, after you were done scolding me, actually explained exactly why it is a "little different". So, thank you for supporting and expanding my point. It's so rare you agree with me.

Vault Box.

Actually, I was agreeing with you consistently, and rather vehemently, on the PCGS voucher thread! 😀

On this topic, although we are apparently trying to one-up each other, we are saying the same thing. Albeit differently.

A sole prop with no enterprise value isn't really a business. It's just a person selling stuff.

I'm a W-2 employee who pays taxes on a Form 1040. Just like a sole prop. I generate an income, just like a sole prop. I sell my services, rather than a tangible asset like coins. But, just like the sole prop who has not built a brand that has a value as a going concern, my income stream also has no enterprise value that can be monetized by me when I retire.

This is distinguished from others, including some sole props, who have built a brand. VB is actually a great example because it has built a brand with a value that goes beyond the coins in the sealed boxes. As evidenced by the premiums each series generates for its owners, beyond the value of what it includes in the boxes. It could easily have been created by a sole prop rather than however it is set up, and it would be able to be sold for more than the sum of its parts.

jmlanzaf

@NJCoin said:

@tyler267 said:
Fair market value of hard assets - liabilities assumed, adjusted up or down for estimated future cash flows

@jmlanzaf said:

@NJCoin said:

@jmlanzaf said:

@NJCoin said:
No different that any other business. Inventory plus other tangible assets plus goodwill less liabilities equals value. No different than a newsstand or a tech company. Why would you think it would be any different?

It is a little different for sole proprietorships because a lot of the non-inventory value can be in the head of the owner and is non-transferable.

So what? If it's not transferable, it's not goodwill, and it doesn't go into the calculation. What did you add by making that comment? A business is a business is a business. Doesn't matter whether it's a sole prop, LLC, partnership, C corp., whatever.

A sole prop that has no transferable value is not a business. It's just a person, like any other person, with assets and liabilities. That can also be bought and sold.

My addition is exactly what it was. I think it's self explanatory. Perhaps not. I might have led your reactive style to focus on the incorporation. The issue meant to be the value of the single individual.

Often, coin dealerships end up being valued at nothing but inventory. That's not quite the same as most other businesses. So, as I said, it is "a little different" because it can rely so much on the value of a single individual. It was not about the nature of the incorporation but the value of the single individual to the operation.

If you don't think that's a "little different", that's fine. Although your last paragraph, after you were done scolding me, actually explained exactly why it is a "little different". So, thank you for supporting and expanding my point. It's so rare you agree with me.

Vault Box.

Actually, I was agreeing with you consistently, and rather vehemently, on the PCGS voucher thread! 😀

On this topic, although we are apparently trying to one-up each other, we are saying the same thing. Albeit differently.

A sole prop with no enterprise value isn't really a business. It's just a person selling stuff.

I'm a W-2 employee who pays taxes on a Form 1040. Just like a sole prop. I generate an income, just like a sole prop. I sell my services, rather than a tangible asset like coins. But, just like the sole prop who has not built a brand that has a value as a going concern, my income stream also has no enterprise value that can be monetized by me when I retire.

This is distinguished from others, including some sole props, who have built a brand. VB is actually a great example because it has built a brand with a value that goes beyond the coins in the sealed boxes. As evidenced by the premiums each series generates for its owners, beyond the value of what it includes in the boxes. It could easily have been created by a sole prop rather than however it is set up, and it would be able to be sold for more than the sum of its parts.

As I said, I think we're in basic agreement. Perhaps we've turned a corner.

lkenefic

Thanks for weighing in on this... the reason for my question is that I always thought, as was pointed out by several, that Valuation = Assets (such as inventory) - Liabilities. Pretty straightforward.

As I look at ebay vendors that put $1k BIN prices on parking lot finds I can't help to think that they're inflating assets for some nefarious purpose...

GoldFinger1969

@jmlanzaf said:
@NJCoin said:
No different that any other business. Inventory plus other tangible assets plus goodwill less liabilities equals >value. >No different than a newsstand or a tech company. Why would you think it would be any different?
It is a little different for sole proprietorships because a lot of the non-inventory value can be in the head of the >owner and is non-transferable.

Also the contact and networks that the dealer has developed. So much of this business is trust, contacts, who you know, etc.

It's not like an old stationary store where you sell newspapers, candy, and cigarettes...and the same exact experience can take place a few blocks away. No 2 coins or dealers are the same.

GoldFinger1969

@lkenefic said:
As I look at ebay vendors that put $1k BIN prices on parking lot finds I can't help to think that they're inflating >assets for some nefarious purpose...

They can ASK whatever they want...it's what it SELLS for that matters. And I mean normalized sales...not a 1-time outlier where some dunce bought at 5x FMV.