How to value a project ??

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Archibald Tyre
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How to value a project ??

Post by Archibald Tyre » Sun Sep 23, 2018 8:29 pm

Any ideas ?
Is someone’s unfinished project worth the sum of the decent parts, for example ?



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Rattling
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How to value a project ??

Post by Rattling » Sun Sep 23, 2018 9:38 pm

Very difficult question! But I would say value is what you are prepared to pay and be happy with which is not necessarily the sum of the parts.


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How to value a project ??

Post by scimjim » Sun Sep 23, 2018 9:42 pm

If we’re talking about Scimitars, unfinished projects are rarely worth the sum total of new parts - that’s why they’re such good buys.


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How to value a project ??

Post by Terry H » Sun Sep 23, 2018 10:04 pm

I bought mine as an almost scrap car, drove it all the way from Leicester to Newport South Wales with no clutch back in 2003. I spent a small fortune on it and got it to a running restoration, all be it a scruffy one, but I saved it. It probably is worth more in parts but why would you want to break a good car.
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How to value a project ??

Post by drcdb15 » Sun Sep 23, 2018 10:47 pm

There are several 'standard' ways to put a monetary value on a project car, but what the seller and buyer agree on depends on their respective perspectives and objectives. For example, if the project is, to the seller, becoming a millstone that is preventing him doing something else (his "opportunity cost"), then the value of the project is anything greater than what it would cost him to dispose of it to (for example) a scrappy. So if it would cost him £50 to a scrappy to take it away, he might be happier to PAY the "buyer" £40 to take it away. "Value" can, in monetary terms, be negative as well as positive.

One standard approach is "what could I get for selling each of the component parts separately?" This is not as simple as it might sound. For example, you could sell the gearbox for £50. Or should you break the gearbox and sell the mainshaft for £20 and the layshaft for £15, and the casing for £15... then what about the used oil? and the bolts ? This approach also depends on the value placed on the time and effort of the dismantling, the cost of any space required (is your drive big enough to lay all the parts out separately?). Then there is the advertising cost, and the time - assuming you won't sell every part at the same time, some parts may sell weeks or even years apart. Then there is the cost of the risk - suppose you don't sell all the parts, and you're left with (say) a bodyshell that nobody wants?

Another standard approach is to say What will it cost me to complete this project, and what will the market value of the finished product be? The value of the project as it stands is then the difference between these two figures. Most textbooks will tell you there are five standard ways to value these things (but I'm retired now and can't remember them all).

The main feature of valuing a project is that it involves a substantial amount of things that are essentially unquantifiable. With a finished car like the Scimitar there are dozens around at any one time, and it is relatively easy to establish a market value by comparison of any one car wth another in similar condition and of similar specification. They each will have minor differences, such as location, so transportation cost for example can influence the market value, but by and large these are relatively minor variations at the edges.

By contrast, with a project these intangible factors are not only a significant factor, but may well be the major component of the overall cost of completing the project. And with each project being unique, comparisons are effectlvely meaningless. For example, the cost of time may be virtually nothing to a retired person, whereas to a working person who has limited time and facilities, some of the work might have to be placed with a professional service, which is likely to cost real money.

Another major factor in valuing a project is timing. With a car, the market value is pretty much constant over a period of time, as there are usually significant numbers of both cars and buyers around at any one time. With a project this is not the case. The numbers of potential buyers at any one time, for a project that is in the specific state that it is in, is probably no more than about 10 people scattered throughout the entire country. At any one time, therefore, the number of realisitc potential buyers who actually want what you are offering may well be zero. A few months later, there may be half a dozen. So whatever basis one might choose for valuing a project, the figure could fluctuate substantially over relatively short time periods. Typically a project could be worth a lot more over the winter than in the summer - or vice versa!

Whatever the theory says, at the end of the day you will only get a sale if the seller and buyer agree a price and the practical arrangements, so for practical purposes an auction is probably the most efficient way to go. And then the final sale price comes down to how much the buyer is prepared to pay given his perception of what it will cost him to get the project finished, and how desperate the seller is to get rid of it (because typically a project for sale is a euphemism for 'a problem I need to get rid of').

May I close by saying how good it is to see a post again from Mr Tyre. Truthfully, I was thinking earlier today that I hadn't seen anything from him for some time, and having my usual smile at the wonderful creativity of his name :lol:


Chris
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How to value a project ??

Post by Stephenl » Mon Sep 24, 2018 4:19 am

Good read.

A couple of other point which occurred to me that I didn't see mentioned

Breaking - as soon as a few parts are gone, a point of (almost) no return is reached. The hard to find bits go straight away, and alot of the remainder are left; no one wants them. So at that point its a pile of junk. A potential buyer would have a tough time recovering the rare missing items, which devalues the car considerably

Along similar lines. As a project, if it's been stripped in any way, then the jigsaw puzzle becomes a lot harder to do, without the knowledge gained from dismantling. Maybe seasoned Scimitar enthusiasts know the cars so well that doens't matter but that's a rare breed; less buyers, less demand, lower prices. Secondly, until a buyer gets it home and spends hundreds of hours on restoration they will never know if anything is missing. A part stripped shell with an interior full of boxes is a big unknown that makes the pile of folding smaller, to account for.
So along come 3 barn find cars, with none of the above issues. No one will want the box of bits. With lower value cars like Scimitars, you start to see the value heading rapisly down

On the plus side, if some work has already been done, well, that costs serious money to do (like paint, or chassis repairs) that's a big plus.


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