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TOPIC: Determining Value

Determining Value 22 Dec 2002 12:43 #28053

  • Tim Eiler
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Am Looking a Theatre for sale. I have an info on the Property value But was wondering About How To Value the Business. I have Seen The P&L on the Place. So I do Know What it has done in the past.
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Re: Determining Value 22 Dec 2002 19:33 #28054

  • CharlieBo
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Past grosses are important,but the MOST important factor is probably the competetive situation.What are you up against?
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Re: Determining Value 01 Jan 2003 22:27 #28055

  • Tim Eiler
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about 15-18 miles away in another town
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Re: Determining Value 01 Jan 2003 23:44 #28056

  • CharlieBo
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with that distance,you should be able to get first run film.What is the population of your drawing area,and how many screens are you going to have??
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Re: Determining Value 03 Jan 2003 11:01 #28057

  • Tim Eiler
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It is an existing first run 3-plex with a pop of approx 12,000
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Re: Determining Value 03 Jan 2003 19:20 #28058

  • CharlieBo
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It sounds like a pretty viable situation.I'm not sure how you place a value on the business.I've heard formulas like 5 times annual earnings are used often,but I guess an appraiser or bank would give you a better answer.
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Re: Determining Value 04 Jan 2003 15:33 #28059

  • D. Bird
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It's common in retail to determine "goodwill" as 4-7 times earnings before taxes. There are many adjustments, ie: if rent on building is not now being paid - and you aren't getting the building and would have to pay rent, that would lower goodwill portion. Family members being paid more than they should ("non-market" wages) would raise earnings. Many other things like if owner is writing off a vehicle and you won't be - you get the point.... Usually inventory (at cost) and BOOK VALUE of equipment is added to goodwill to give you a total price.

Try driving the sale yourself, get a look at the books, and tell them you'll give 4X adjusted earnings + equipment, if it works for you and you explain your methodology, maybe they bite. It's not like these places are bought and sold too often these days.....

[This message has been edited by D. Bird (edited January 04, 2003).]
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Re: Determining Value 05 Jan 2003 15:42 #28060

  • BECKWITH1
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Formulas are great and I am all in favor of them, but I can also tell you that when we bought our theater 6 years ago I was still in banking. I had several long chats with my commercial lender friends (I was in retail). They really had no firm basis for valuing a business. While they played around with the 3 times net income rule they all agreed that that is a very general guide which depends upon too many variables.

Remembering that "value" is what a willing buyer will pay a willing seller is actually more helpful than it seems. We have looked at every available opportunity within 40 miles from purchasing commercial property and building a new theater to expanding our present theater to leasing a bigger complex. When you look at these differing types of opportunities it almost becomes easy. What will it cost us in monthly payments (equipment loans, mortgage, lease & CAM charges vs. what can we reasonably expect to gross). Can we make a living? What is the competitive situation vs how many people live in the available area. Are we likely to get new competitors? Are there any special extra costs - i.e. county sales tax is 5.5% in one county vs 7.00% in the next. What kind of equipment will we have? Will we need to replace it? Upgrade it? Can we live with it for a while? (BTW according to NATO the deadline for red light readers is June, 2003 after which date some studios have indicated that they will release film only in cyan dye prints. Many projectors still don't have red light readers.)I think that we have thought about all these factors which are important to us for so long that we have internalized the cost vs. risk vs benefits equation and have rejected many situations because one or more variables just didn't make sense.
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Re: Determining Value 06 Jan 2003 11:14 #28061

  • John Pytlak
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Hopefully the relatively small cost of upgrading to a red LED reader won't be the deciding factor in not buying a theatre.


John P. Pytlak, Senior Technical Specialist
Worldwide Technical Services
Entertainment Imaging
Research Labs, Building 69, Room 7525A
Eastman Kodak Company
Rochester, NY 14650-1922
Telephone: 585-477-5325 Cell: 585-781-4036 Fax: 585-722-7243
E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: http://www.kodak.com/go/motion
John P. Pytlak, Senior Technical Specialist
Customer Technical Services
Entertainment Imaging
Research Labs, Building 69, Room 7525A
Eastman Kodak Company
Rochester, NY 14650-1922
Telephone: +1 585-477-5325 Fax: +1 585-722-7243
E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: http://www.kodak.com/go/motion
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Re: Determining Value 06 Jan 2003 16:02 #28062

  • BECKWITH1
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I appreciate your thought about the cost of red light readers but if it were insignificant in cost most people would have replaced them by now especially given the benefits in better sound. Unfortunately, they haven't and that leaves us stuck with the cost and a deadline approaching. While the cost varies depending on your projector and the quality of the reader that you want (jaxlite anyone?) we are still looking at $800 per machine. Times that by 4 or 8 and you are looking at a significant cash outlay that has to be factored in to all the financing and start up costs.
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Re: Determining Value 06 Jan 2003 16:47 #28063

  • Mike
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.....and then there's the real estate depending on your town or location the real estate is valuable in of itself above and beyond whatever may be setting on it.

Estimating it backwards is how I would do it. Gross minus everything leaves how much to buy a theatre or renovate or lease, etc?

Michael Hurley
Impresario
Michael Hurley
Impresario
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Re: Determining Value 07 Jan 2003 10:50 #28064

  • John Pytlak
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Here's the Dye Tracks website:
http://www.dyetracks.org

And Kodak information:
http://www.kodak.com/US/en/motion/support/dyetrack.shtml

John P. Pytlak, Senior Technical Specialist
Worldwide Technical Services
Entertainment Imaging
Research Labs, Building 69, Room 7525A
Eastman Kodak Company
Rochester, NY 14650-1922
Telephone: 585-477-5325 Cell: 585-781-4036 Fax: 585-722-7243
E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: http://www.kodak.com/go/motion
John P. Pytlak, Senior Technical Specialist
Customer Technical Services
Entertainment Imaging
Research Labs, Building 69, Room 7525A
Eastman Kodak Company
Rochester, NY 14650-1922
Telephone: +1 585-477-5325 Fax: +1 585-722-7243
E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: http://www.kodak.com/go/motion
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Re: Determining Value 07 Jan 2003 14:55 #28065

  • BECKWITH1
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Great links John! Thank you!
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Re: Determining Value 07 Jan 2003 22:58 #28066

  • RoxyVaudeville
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That was an interesting link John. I'm getting ready to order mine shortly. Of course with two projectors I'll need two of them. Even this won't get me to change to a platter.

I found it interesting that it said one of the benefits of this system is that the LEDS will last 10,000 hours compared to only an average of 3,000 for exciter lamps. I haven't changed an exciter lamp in over twenty years. That's about 12,000 hours per machine. Many years ago I bought some more backups just in case... but they are still in the parts cabinet waiting their day... and now that day may never come.

Exciter lamps are relatively cheap. Just what will need changing for the LEDS I'm not familiar with, and what will that cost?
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Re: Determining Value 08 Jan 2003 13:40 #28067

  • John Pytlak
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You need to work with your theatre dealer/service company to price out the conversion and maintenance costs. They can give advice on obtaining the maximum life from the LED (e.g., don't use higher current than necessary to get proper signal level) and what maintenance schedule they would recommend.

John P. Pytlak, Senior Technical Specialist
Worldwide Technical Services
Entertainment Imaging
Research Labs, Building 69, Room 7525A
Eastman Kodak Company
Rochester, NY 14650-1922
Telephone: 585-477-5325 Cell: 585-781-4036 Fax: 585-722-7243
E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: http://www.kodak.com/go/motion
John P. Pytlak, Senior Technical Specialist
Customer Technical Services
Entertainment Imaging
Research Labs, Building 69, Room 7525A
Eastman Kodak Company
Rochester, NY 14650-1922
Telephone: +1 585-477-5325 Fax: +1 585-722-7243
E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: http://www.kodak.com/go/motion
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