Looking to sell my company. Any advice on posts to read?

[Ultra7]

I been thinking about selling my company that nets about $20,000+ per month. With hundreds of thousands of posts to dig through on the forum I wanted to see if anyone could point me in the right direction of some good posts on selling a company.

To put things into perspective: My business is about 3 years old. I grew slowly and steadily. I was my first staff member and once I had enough work to keep me occupied I took the last $2,000 I had to my name and hired another staff member. The work kept coming. So I scaled appropriately and hired more people. For the last 12 months I have steadily netted a minimum of $20,000+ and even sometimes $30,000+ per month. I now have 7 full-time employees. I'm my only sales person and I run the entire team by myself. Since May 2011, I have had about 650 clients and sent over 1,700 invoices. Many of those customers come back time and time again.

I've recently decided that an exit from my company would be nice. While I make good money (in my opinion) I spend far too much time working and managing things. I would love a large cash injection I can invest back into another business of mine, which is steadily netting about $10,000 per month and has been for the passed year+. Again I am growing it slowly but steadily.

The business I want to sell doesn't have a typical office location. Although ideally, it would. All of my staff work remotely from their homes. Is that a deal breaker for someone looking to buy a company? I am thinking of selling to a competitor for the right amount or one of the larger companies in the same industry. But I've never done this before so I'm just hoping someone would be nice enough to point me in the right direction.

Anyone care to discuss? Thanks!

 

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[RHL]

My guess is that people are going to direct you to the INSIDERS section, and for this type of thing, I'd totally agree. A liquidation event, especially for a real company, is not something to screw around with. It's the fastlane end game, and I and many other people here who are not part of INSIDERS (along with more than a few who are, I would guess) know virtually nothing about how to do it well. INSIDERS is likely to connect you with people who do, but you should wait for them to chime in.

 

[Ultra7]

My guess is that people are going to direct you to the INSIDERS section, and for this type of thing, I'd totally agree. A liquidation event, especially for a real company, is not something to screw around with. It's the fastlane end game, and I and many other people here who are not part of INSIDERS (along with more than a few who are, I would guess) know virtually nothing about how to do it well. INSIDERS is likely to connect you with people who do, but you should wait for them to chime in.

Thanks for the response. I'll do just that.

 

[HenkHolland]

I would advise you to contact at least two reputable small business brokers in your area and have an intake meeting with each of them without any commitment. Those meetings should give you a good insight in where you stand in terms of saleability and valuation of your company. You can then decide to sell the company yourself or to hire one of the brokers if you perceive added value in hiring one of them.
Only deal with a broker who is prepared to work solely on the basis of a success fee.
Selling your own company can be difficult, due to your emotional involvement.

 

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[Ultra7]

I would advise you to contact at least two reputable small business brokers in your area and have an intake meeting with each of them without any commitment. Those meetings should give you a good insight in where you stand in terms of saleability and valuation of your company. You can then decide to sell the company yourself or to hire one of the brokers if you perceive added value in hiring one of them.
Only deal with a broker who is prepared to work solely on the basis of a success fee.
Selling your own company can be difficult, due to your emotional involvement.

Thanks for your reply. One thing I suppose I should mention is I'm Canadian but choose to live in Central America since I can run the business anywhere. So the country I'm in isn't the country I'd be looking to sell in. (I'm not sure that's relevant but figured I'd mention it).

And unfortunately this really isn't the kind of place that has small business brokers.

 

[JEdwards]

I will say this, Its going to be a tough sale for top dollar. The low ball offers will come.

Your out of the country, all your employees work from home etc. I would guess zero assets.

You might find it easier to just keep with what you are doing sadly.

 

[Ultra7]

I will say this, Its going to be a tough sale for top dollar. The low ball offers will come.

Your out of the country, all your employees work from home etc. I would guess zero assets.

You might find it easier to just keep with what you are doing sadly.

That is certainly a reality I may have to face.

 

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[100k]

Sell it online. Find a website broker.

You can probably get $200k-400k for it.

But you should def. sell it to someone that wants to run a virtual company / website.

On Blackhatworld there is a guy there called MeatHead... he can probably help you - I think he also works for flippa.com



Also.... try to get the attention of M.J, the owner of this forum..... he can probably point you in the right direction better than anyone else

 

[Mike39]

That is certainly a reality I may have to face.

You could let someone else run it for a partial revenue on your net profits (no equity) and it would 99% passive outside of a small advisory role. That would still bring in a substantial income while more importantly allowing you to put more time into growing your other business.

I'll even volunteer to fill that role if you operate in a English speaking market.

Experience managing remote staff (both sales staff and developers), personal experience w/ inside sales, web design & SEO knowledge, extremely hard working plus some other stuff here and there

Just throwing that out there to see what comes back

 

[Ultra7]

Sell it online. Find a website broker.

You can probably get $200k-400k for it.

But you should def. sell it to someone that wants to run a virtual company / website.

On Blackhatworld there is a guy there called MeatHead... he can probably help you - I think he also works for flippa.com



Also.... try to get the attention of M.J, the owner of this forum..... he can probably point you in the right direction better than anyone else

Thanks for the advice.

 

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[Ultra7]

You could let someone else run it for a partial revenue on your net profits (no equity) and it would 99% passive outside of a small advisory role. That would still bring in a substantial income while more importantly allowing you to put more time into growing your other business.

I'll even volunteer to fill that role if you operate in a English speaking market.

Experience managing remote staff (both sales staff and developers), personal experience w/ inside sales, web design & SEO knowledge, extremely hard working plus some other stuff here and there

Just throwing that out there to see what comes back

I've thought about doing this but it comes down to me wanting to pad my bank account. I have about 100k saved up but would like more. I do not own a house, and would like to buy one here. On top of that, if I took that route then I would really need to know the person as I'm giving them access to my list of clients, invoices, contact info, where/how I get my business, everything. I tried bringing in my brother but it didn't work out. And he's about the only guy I'd trust with that sort of thing. What can I say.. I have some trust issues.

 

[Mike39]

I've thought about doing this but it comes down to me wanting to pad my bank account. I have about 100k saved up but would like more. I do not own a house, and would like to buy one here. On top of that, if I took that route then I would really need to know the person as I'm giving them access to my list of clients, invoices, contact info, where/how I get my business, everything. I tried bringing in my brother but it didn't work out. And he's about the only guy I'd trust with that sort of thing. What can I say.. I have some trust issues.

Oh I hear ya, someone would have an incredibly difficult time convincing me to hand over the reigns of my business to someone else. Something to note, I think all the access to pertinent info could be protected legally through a non-compete/disclosure agreement (not legal advice, you would need to talk to a lawyer to make sure) in case you ever do decide to take that path further down the road.

Might as well ask, right; I certainly wasn't expecting you to hand over day to day operations of your company to some stranger on the internet.

Not to say that I wouldn't be open to discussing it once you get that house purchased and the income becomes less-essential, you have my PM :smxF:

 

[Ultra7]

Oh I hear ya, someone would have an incredibly difficult time convincing me to hand over the reigns of my business to someone else. Something to note, I think all the access to pertinent info could be protected legally through a non-compete/disclosure agreement (not legal advice, you would need to talk to a lawyer to make sure) in case you ever do decide to take that path further down the road.

Might as well ask, right; I certainly wasn't expecting you to hand over day to day operations of your company to some stranger on the internet.

Not to say that I wouldn't be open to discussing it once you get that house purchased and the income becomes less-essential, you have my PM :smxF:

I can't blame you for trying.

 

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[Ultra7]

I'd love to hear from someone who's sold a business like this. No physical office with employees, no face to face clients, etc. Anyone?

 

[Ultra7]

Anyone else got some more input on how to sell a company like this? Thanks!

 

[1step]

Have you read the book "Built to Sell" its great and I bet it would help you in your current situation.

 

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[458]

You may think about trying to open an office and transition from outsourcing everything to doing it all under one roof and then trying to sell it. This assumes that it won't kill your profit margin in the process.

Just a thought.

 

[WestCoast]

There are many ways to sell a business. Most business brokers in that size range will focus on 'Seller's Discretionary Cash Flow' ie, net profits, plus owners income, plus add backs. You can then multiply that by some number 3-5x is the generic range. And there you go. At least, this is what SBA loans will tolerate if someone needs to borrow to buy in the US.

If you are putting it out as an all cash deal, well, who knows, whatever the market will bear....

You being the primary salesperson is a large negative to business valuation, as the person who buys will need to do same.

I think your lack of location is a benefit honestly. I pay thousands of dollars a month to rent a large space. If that went away, that money goes into my pocket.

You'll need tax returns showing the size of the business and growth. My guess is you will get the most value in 1-2 years when you have shown the large 'net income' being steady for a solid amount of time.


--
Now, something also doesn't feel right about this. No judgement, but you say you have been doing this for 3 years.
You have one business throwing off a net monthly profit of $25,000 (USD I assume?). And another business throwing off $10,000USD. For a rough total of $35,000USD a month in 'net profit'. That's just over $400k a year.

Yet, you only have $100k saved up.....

Either you are heavily reinvesting to grow business (or had a ton of debt to dig out of)
the $35k a month 'net' profit is a very recent development,
or, more likely, your net profit is really your gross profit before expenses.


Either way, if I saw those numbers I would be *very* curious if you knew the numbers as well as you said.
Not being suspicious of what you claim, but something doesn't add up.

 

[Ultra7]

I suppose I should clarify. When I say profit, I am talking profit after all business expenses. What my personal life costs has nothing to do with the business.. so I only included my business expenses in my original post. So even though I make 30k a month, my living expenses are about $10k. Which leaves about 20k profit.

I rent 2 houses here, I travel every few months and sometimes every 2 weeks. I have an awesome life and I like to spend money. I go out for dinner at least once, usually twice a week. We eat out all the time. etc. I'm definitely guilty of being terrible at saving. It was also an expensive year, this year. I tried opening an office here for another business idea I had, and after 7 months I closed my doors. That in itself, cost me about $50k.

I also have zero debt, I own everything outright but rent my homes.

My main business is about 3 years old. This is the business I want to sell. I have not been making 25k/month profit for 3 years. I started this business with my last $2,000 when I was 26. I just went and pulled my numbers for 2011. The first year was relatively slow, but I still did OK. Better than I thought actually. I started using my invoice system in May 2011, so thats when I have the invoices since. From May 2011 to December 31, 2011 I did $77,212 total revenue. May was $4,284 revenue, while December was $11,456. I do not have my expenses documented as I didn't start documenting those using the invoice system until this year (2013).

2012 was a great year and I grew to about 15k to 25k per month. I just checked and I did $16,170 in January 2012, and $25,989 in December 2012. The total in 2012 was $275,578.10. Again, I have no documented expenses in my invoice system. I really should have started to track these sooner.. but I didn't.

2013 has been great to me. I've averaged 20k-25k+ profit every month off just the one business. In January 2013 I did $43,380 in revenue. This month so far (1 week left) I've done $29,760 in revenue. From January 2013 to December 2013 I've done $475,110.60 in revenue. Keep in mind my business expenses never surpassed $10k/month this year. Lets be generous and say $12k in case I forgot anything. I have my expenses documented since August 2013.

So as you can see I've built things slowly but surely, over 3 years. I started with 1 employee, and scaled appropriately.

The second business, which is running at approximately 10k profit/month, has been running since late last year (2012) and only had a few clients up until February, when I slowly started to scale it out. I got things going pretty good now and it did $210k+ in revenue this year.

Tax returns would be an issue. I don't have any. I'm Canadian, but 'm not a Canadian resident. I live in Central America. As such, I do not pay CA taxes so don't have any sort of tax returns. With the structure I have setup, I am 100% legally registered offshore and bank offshore. I just turned 30 and have not lived in Canada since I was 19. And as a non resident of Canada I believe I don't have to file anything. At least I never have.

I should note both the business are absolutely 100% legal everywhere in the world. I am doing nothing shady whatsoever. I'm not trying to sell anyone here anything. And I do realize how entirely sketchy this all must sound.. no tax returns, I live in Central America, I make 30k a month, I mean.. come on.. it sounds a little far fetched and thats the entire reason I made this post in the first place. So I can get some advice on selling a company when you're in my position. I'm sure there are others just like me.

Hopefully this adds a but more insight to things.

There are many ways to sell a business. Most business brokers in that size range will focus on 'Seller's Discretionary Cash Flow' ie, net profits, plus owners income, plus add backs. You can then multiply that by some number 3-5x is the generic range. And there you go. At least, this is what SBA loans will tolerate if someone needs to borrow to buy in the US.

If you are putting it out as an all cash deal, well, who knows, whatever the market will bear....

You being the primary salesperson is a large negative to business valuation, as the person who buys will need to do same.

I think your lack of location is a benefit honestly. I pay thousands of dollars a month to rent a large space. If that went away, that money goes into my pocket.

You'll need tax returns showing the size of the business and growth. My guess is you will get the most value in 1-2 years when you have shown the large 'net income' being steady for a solid amount of time.


--
Now, something also doesn't feel right about this. No judgement, but you say you have been doing this for 3 years.
You have one business throwing off a net monthly profit of $25,000 (USD I assume?). And another business throwing off $10,000USD. For a rough total of $35,000USD a month in 'net profit'. That's just over $400k a year.

Yet, you only have $100k saved up.....

Either you are heavily reinvesting to grow business (or had a ton of debt to dig out of)
the $35k a month 'net' profit is a very recent development,
or, more likely, your net profit is really your gross profit before expenses.


Either way, if I saw those numbers I would be *very* curious if you knew the numbers as well as you said.
Not being suspicious of what you claim, but something doesn't add up.

 

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[Ultra7]

You may think about trying to open an office and transition from outsourcing everything to doing it all under one roof and then trying to sell it. This assumes that it won't kill your profit margin in the process.

Just a thought.

While certainly possible, I would like to avoid doing this if possible.

 

[ralphT]

Can I simply ask what does this business sell? Based on the high margins and remote workers etc... I'm assuming its a very low overhead internet business. Have you ever considered hiring and training a sales team and paying them a commission based income? This could improve passivity for the time being until you figure everything out.

 

[Ultra7]

Web development.

As it stands I get a lot of business from my own ads, return clients and referrals. There is really no need to bring in more sales people. Getting the work isn't really the thing that takes up my time, It's managing staff and clients.

Can I simply ask what does this business sell? Based on the high margins and remote workers etc... I'm assuming its a very low overhead internet business. Have you ever considered hiring and training a sales team and paying them a commission based income? This could improve passivity for the time being until you figure everything out.

 

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[CommonCents]

congrats on building a nice biz. You are limited in the marketplace(which reduces value) with a virtual staff. As it could vaporize instantly at change of ownership for whatever reasons. People do dumb things like try and steal clients from you. I even had an employee (sales guy) leave with a joint venture partner of ours to steal a client of ours and he took the company laptop and tried to send back a brand new empty one he bought thinking he'd fool us. He is now in big doo doo. Just don't underestimate people to do dumb things like that.

To maximize your value you are going to have to help the buyer reduce the risks that they see. Whether thats a large holdback and structured earnouts over time for hitting/maintaining certain numbers. I'd first look in the community that does exactly what you do, manage a virtual workforce as they'll be more comfortable with it. you'll get more money if you structure over time as they continue successfully and you'll get less the more you want upfront. The longer term earnout scenario also gives you some risk/incentive to stick around and make sure they don't run your biz (and your future payments) into the ground.

 

[Ultra7]

Thanks for your post. I've always had problems trusting other people with my business. My main worry with hiring any sort of Manager or someone to run this is that they will steal my clients and staff. I keep all staff and clients separate. I'm the only one that ever talks to my clients via email, phone or IM. But of course by doing that I only create more work for myself.

I really don't agree with the structured payouts. That's not what I want. My main reason for wanting to sell is to get a big cash injection. I don't want to sit around and babysit someone. They can screw it up by treating clients the wrong way, doing something shady, getting a bad reputation, etc. Then I'm the one who loses.

The good thing is that I'm in no hurry. So I can take some time in 2014 and really figure out what direction I'm going to take.

Happy Holidays!

congrats on building a nice biz. You are limited in the marketplace(which reduces value) with a virtual staff. As it could vaporize instantly at change of ownership for whatever reasons. People do dumb things like try and steal clients from you. I even had an employee (sales guy) leave with a joint venture partner of ours to steal a client of ours and he took the company laptop and tried to send back a brand new empty one he bought thinking he'd fool us. He is now in big doo doo. Just don't underestimate people to do dumb things like that.

To maximize your value you are going to have to help the buyer reduce the risks that they see. Whether thats a large holdback and structured earnouts over time for hitting/maintaining certain numbers. I'd first look in the community that does exactly what you do, manage a virtual workforce as they'll be more comfortable with it. you'll get more money if you structure over time as they continue successfully and you'll get less the more you want upfront. The longer term earnout scenario also gives you some risk/incentive to stick around and make sure they don't run your biz (and your future payments) into the ground.

 

[biophase]

If you are in no hurry then take 2014 to begin documenting and implementing your accounting systems so that you have accurate numbers to show people when you try to sell.

 

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[H. Palmer]

Have you read the book "Built to Sell" its great and I bet it would help you in your current situation.

This is definite Must Read if you want to sell your company.

 

[Ultra7]

Already doing this since August 2013.

If you are in no hurry then take 2014 to begin documenting and implementing your accounting systems so that you have accurate numbers to show people when you try to sell.

 

[Ultra7]

Thank you. Ordering it now.

This is definite Must Read if you want to sell your company.

 

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[jon.a]

Unless I missed it, you haven't been very transparent as to what the business does. Is this because it could be replicated for far less than you're hoping to cash-out for?

 

[JasonR]

Unless I missed it, you haven't been very transparent as to what the business does. Is this because it could be replicated for far less than you're hoping to cash-out for?

He said it's a web development company.

Read and devour built to sell. It will give you a new perspective on your business. I have a feeling, that if it's a service based business, your business will be difficult to sell. But, that doesn't mean you can't get it there.

Good luck!