How does one value a translation agency?
Thread poster: TransAction

Local time: 06:34
Member (2006)
English to Dutch
+ ...
Feb 23, 2012

Does anyone have experience in buying or selling a translation agency?
How is a business valuated? X times the turnover? X times the profit per annum?
Also, I assume that an earn-out construction would be interesting, to transfer know-how...
Any information welcome

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Tomás Cano Binder, BA, CT  Identity Verified
Local time: 06:34
Member (2005)
English to Spanish
+ ...
Just my personal opinion Feb 23, 2012

This is just my personal opinion. I do not have any experience buying or selling an agency. I reckon that what you are buying is just the POTENTIAL of income, and therefore the agency's potential after the purchase is the key here, way before you discuss the actual amount of the transaction.

Some questions I would ask myself if I entertained the idea of buying any kind of company are:

- How personal is the business, i.e. how many of the current customers will be uncertain when the current owner/management leaves the place.

- What long-term signed contracts are there in place with the customers, i.e. will customers stay for a while, to see how they like the new management's performance?

- When the current owner/management leaves, will the current personnel be able to provide a seamless service with a sustained quality to the customers? Are there information, methods, attitudes, capabilities that cannot/might not be put on paper and will be lost when the current owner/management leaves the place?

- And also important, what are the chances that the current owner/management open a new firm next door and some of their customers decide to follow them?

- The most important question last: Why is the current owner selling the company? Are you absolutely certain that it is for personal reasons and not business reasons (things not going too well lately)?

If what you are purchasing is just goodwill, i.e. there is no personnel or physical means of production, the questions above become more critical, since the company IS the previous owners/management and all you get is an empty shell you must fill with your own capabilities.

And on the liabilities side:

- What liabilities does the agency have at the moment (accounts payable, open legal actions against the agency, personnel expenses...)?

- Are you willing to accept or improve the payment terms and other conditions applied by the agency to their current translators? If you plan to change them to the worse, you could be losing some of the translators and therefore the style/flavour/quality the end customers expect.

As for the calculation base for a potential price, always make sure you see actual official turnover/profit figures, not shiny and colourful forecasts. Forecasts are just a piece of paper anyone can prepare while eating toast in the morning.

Interesting topic!

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Rolf Keller
Local time: 06:34
English to German
Don't forget the translators Feb 23, 2012

Tomás Cano Binder, CT wrote:

- And also important, what are the chances that the current owner/management open a new firm next door and some of their customers decide to follow them?

Yes. And don't forget the freelance translators who might follow them as well.

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How does one value a translation agency?

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