I own 20% of an oilfield company and I am thinking of selling my share currently I am compiling all info I think I need. I am getting the last 3years financial statments then I think I should take them to an accountant so he can tell me what he estimates the companys value. Then off to a lawyer with the ownership agreement to see the fine print ect about selling or going to court. Anyone have any advice or suggestions? I have heard a rule of thumb is when selling a company it is worth what it makes in 5 years?? If any one else heard the same it that 5years net or gross?? Or is it simply what your assets are worth? I am just trying to see if it is even worth my time(if I can be debt free I will sell) before I spend a bunch of money on lawyers and accounts
Thanks in advance for any advice.

 

Obviously it's not a publicly traded company. Sounds like your agreement may not be comprehensive it there is no shotgun clause or clarity on sale of shares.

There are many different ways to value a business, depending on the age, size type of business etc. Best talk to someone experienced in doing valuations for oilfield and related co's.

The rule of thumb you're speaking of is times(x) annual earnings, which is one of the ways to value a business. Often a small business is valued at several times annual earnings - 2-5 might be normal for a small business but there's lots of variables. Large corps might range from 5-30+ depending on debt, type of industry and are typically in the 10-15 range.

Here is a link that provides an explanation on 2 different common methods. They refer to 11 different possible methods. http://www.ventureline.com/bizval.asp

Good luck with checking it out and with the negotiations.