May Sell My Online Business

[Rem]

OK I got an offer on my business. It's not what I wanted but it is a nice chunk of change. The other option we are discussing is having them buy in 60% controlling interest of the business. The company buying me out is a bigger one and can probably do a lot with it that I couldn't myself. I am just not sure I want to stay in at 40%.

I did the math. They think they can easily grow my business 50% each year over the next 4 years. At that rate it would only benefit be short term... maybe 2 years with the initial 60% paid. After the 3rd year I would be better off not selling out. This is also assuming if I did this alone I would not grow but only maintain the current income. It's likely I will be able to grow it more on my own.

On the flip side, that is their conservative estimate. If they were to grow it 100% or more each year with the resources they have then I would be better off selling it at 60% and getting my 40% profit share.

If I sold my business off completely then of course I wouldn't look back. Oh the decisions... I could pocket it all. I could use it all to start a new business. I could divide it up. This is where having solid concrete goals is important. If I knew where I wanted to be in 10 years from now it would make this decision a LOT easier.

 

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[Rem]

Anyone have any advice on this? Anyone ever in a similar situation?

 

[GlobalWealth]

Anyone have any advice on this? Anyone ever in a similar situation?

I posted something on here a couple of weeks ago about goal setting. You should definitely do some goal setting as this will help you determine where you want to go. If you sell outright, that can free your time up dramatically, but what are you going to do with your time? Golf? Probably not. You need a plan. Maybe you don't know what to do next, but you need to formalize what you want to accomplish, and then the tools will reveal themselves to you along the path. If you don't know where you want to go, you are certain to never get there.

 

[andviv]

take the money and run... and then start something else in a little bit. You do have plans (even though many here don't agree with the idea of paying off your mortgage,for example), so how would this money fit in that picture?

 

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[Jonleehacker]

Remember what my Grandma used to say, "a bird in the hand is worth two in the bush."

I've sold sites where the people told me about their big plans and then the site stays unchanged for years after they have taken ownership.

In extreme cases, this has happened twice, they have paid me for the site, and left it on my server (never switched over the dns) and it has continued to earn me money for as long as a year!!!

Anyways, make a plan now, before you accept the offer. Doesn't have to be big, just run through the scenarios and think about what you would most likely do with the money in each scenario. I'll bet you'll find that one is the most appealing or exciting.

 

[Rem]

Thanks guys for the advice. I like the idea of taking the money and running and starting something new. Between selling my business and selling my old house I could get a real nice chunk of cash.

I am afraid to go into business with them because I will end up doing all the work for only 40%.

I may even consider buying into another online start up business and then working full time on that. I'll have to keep my eyes open.

 

[GlobalWealth]

Thanks guys for the advice. I like the idea of taking the money and running and starting something new. Between selling my business and selling my old house I could get a real nice chunk of cash.

I am afraid to go into business with them because I will end up doing all the work for only 40%.

I may even consider buying into another online start up business and then working full time on that. I'll have to keep my eyes open.

I would tend to agree that if you are going to sell, sell out. Take the money and run. but you still need to determine what you want to accomplish and where you are going. if you sell, will you have enough money to live for a while without bringing in an income?

 

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[Rem]

I would tend to agree that if you are going to sell, sell out. Take the money and run. but you still need to determine what you want to accomplish and where you are going. if you sell, will you have enough money to live for a while without bringing in an income?

I agree that I need a plan. But I can live with no income. My wife makes enough money to support us all. Whatever I make is gravy. I agreed to pay $1,000 per month towards mortgage on our new house. But other than that it's basically what I want personally to do. Maybe while I think about it, try to find a job online paying at least $1,000 per month???

Anyone hiring? :smxF:

 

[Rem]

I was thinking of starting a family business here at home. I have 6 kids and as they get older if they choose to work with me they can. Trying to come up with a business idea that could get everyone involved.

Would love to hear some ideas and brainstorm this.

 

[GlobalWealth]

I was thinking of starting a family business here at home. I have 6 kids and as they get older if they choose to work with me they can. Trying to come up with a business idea that could get everyone involved.

Would love to hear some ideas and brainstorm this.

I suppose making employees is one way to do it, but you do have to deal with the gestation period...

 

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[Jonleehacker]

try to find a job online paying at least $1,000 per month???

Anyone hiring? :smxF:

I have 6 kids and as they get older if they choose to work with me they can.

I own ConceptionAdvice.com maybe I should hire you to write an ebook, seems like you are an expert on the topic

 

[ProfessorSpeed]

If you haven't agreed on a final price and they end up asking for a few "extras", see if they will consider leaving you a minimal share of 5%. This could include staying on for a few weeks to help transition, cleaning up or creating any records or documents, training their employees/contractors, etc.

If you really believe they have the resources to grow your company 2X,3X, this is a good way to keep your hand in the cookie jar for the passive income growth without risking a significant amount of today's money.

 

[psynapse]

Congratulations! I'd say definitely 'bird in the hand' wisdom is sound. Who knows what will happen tomorrow?

I've been looking to sell one of my online businesses also - can I ask what your valuation method is? Revenue or net profit multiple?

 

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[Rem]

Right now they are taking what I grossed in 2009 and averaging out what the company brought in for revenue each month (gross). Then they are multiplying it by about 16 months. I am trying to get them to agree to 24 months.

If they don't do 24 months then I will probably not sell out or sell any shares. I would much rather take the monthly income. It's all so passive it's hard to justify selling out unless it is a nice chunk of change. It's such a passive income I am probably going to start a completely new full time business and keep this one going.

As for hiring me to write an ebook. I can try. I wrote a book before and have actually thought about publishing another one based on the entire stay at home dad experience.

 

[Smooth]

Whatever you do, remember to take a breath every once in a while and enjoy the money you earned with your hard work. Entrepreneurship can get tiring.

If you still love what you do, stick with it. If you are losing interest or want to switch things up a bit, sell.

Take a vacation and think it over.

 

[EastWind]

Right now they are taking what I grossed in 2009 and averaging out what the company brought in for revenue each month (gross). Then they are multiplying it by about 16 months. I am trying to get them to agree to 24 months.

If they don't do 24 months then I will probably not sell out or sell any shares. I would much rather take the monthly income. It's all so passive it's hard to justify selling out unless it is a nice chunk of change. It's such a passive income I am probably going to start a completely new full time business and keep this one going.

As for hiring me to write an ebook. I can try. I wrote a book before and have actually thought about publishing another one based on the entire stay at home dad experience.

Hello sm_media, I will like to start off with a disclaimer that I have never even operated my own business, talk less of selling one, so I might just be talking junk.

But you mentioned that your business is SOOOO PASSIVE, so WHY THE HELL are you thinking of selling it? DUDE! you don't have a concrete idea on what you are going to do next. So wanna know my idea. DON'T SELL IT. It doesn't make any sense.

Now, this is why I said this. If you have a business, that is making money. Let's suppose that this business is taking 40-60hrs of your time each week thus slowing you down from doing other things OR you kind of see the market fizzling out in a year or two. Then by all means sell, Sell to free up your time so you can do bigger things or to get out before the market dies.

The other reason to sell is to RAISE HUGE CHUNK OF MONEY for your NEW SOLID IDEA. Let's say your current business will bring you $100k after tax sales. Let's assume you have a solid idea that you believe can bring you in $50k a month, but you need money to start it, and you do need around $100k cash that you can't get elsewhere. Then since you have a solid idea, then it's worth selling, even if your business is only costing you 4hrs a week. You lose that income, but you have a good shot of going from $1,000-$2,000 a month by to $50k a month by using that $100k.

You are THINKING OF STARTING A FAMILY BUSINESS. Dude, keep thinking and leave this business you got alone. When you finally DECIDE TO, and know for certain what you are going to do. Then, think of selling.

Again, I have never operated my own business or sold one. But you have only three reasons to sell (1) To free up your time (2) The market is ending (3) You have a bigger and better idea that needs the cash from the sales. You have demonstrated NONE of these. So please, don't do it!

Keep that business going, keep getting paid monthly. It's so passive, that means it doesn't take a lot of time so you have a lot of time to start another one. Start another one and try to bootstrap it if you can, just like you did this one. Good luck!

 

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[GlobalWealth]

operated my own business, talk less of selling one, so I might just be talking junk.

But you mentioned that your business is SOOOO PASSIVE, so WHY THE HELL are you thinking of selling it? DUDE! you don't have a concrete idea on what you are going to do next. So wanna know my idea. DON'T SELL IT. It doesn't make any sense.

Of course without knowing the details of the financial transaction, we cannot know if this is a good sell or not, but the reasons are financial.

For example, if he is earning $10,000 per year and we establish his business is worth 3x CF (cash flow), that is $30,000. But you have to discount that based on what he could earn with his money in another investment. If he could earn 10%, then in today's dollars, it would be worth about $22,500 (sorry I have long since forgotten the formula, I just use my biz calculator now).

So in this case, if he could get anything more than $22,500, it is good for him to sell because he eliminates the risk of NOT earning $10,000 for the next 3 years and can invest the money earning 10% per year.

You also need to consider opportunity cost. What if he can do something completely different earning $12,000 per year with the same amount of time? If he DOESN'T sell, it costs him $2000 per year to keep doing the same thing.

so just because the income is passive, it doesn't mean it stays passive forever. And even passive income is rarely, completely passive. There is almost always some time commitment.

 

[EastWind]

Of course without knowing the details of the financial transaction, we cannot know if this is a good sell or not, but the reasons are financial.

For example, if he is earning $10,000 per year and we establish his business is worth 3x CF (cash flow), that is $30,000. But you have to discount that based on what he could earn with his money in another investment. If he could earn 10%, then in today's dollars, it would be worth about $22,500 (sorry I have long since forgotten the formula, I just use my biz calculator now).

So in this case, if he could get anything more than $22,500, it is good for him to sell because he eliminates the risk of NOT earning $10,000 for the next 3 years and can invest the money earning 10% per year.

You also need to consider opportunity cost. What if he can do something completely different earning $12,000 per year with the same amount of time? If he DOESN'T sell, it costs him $2000 per year to keep doing the same thing.

so just because the income is passive, it doesn't mean it stays passive forever. And even passive income is rarely, completely passive. There is almost always some time commitment.

Excuse me sir, I don't think you read my entire post. I mentioned about the opportunity cost. If he has another solid idea that can do better, then yes, sell it and focus on the new stuff. I don't understand what you mean by the "risk of NOT earning $10k for the next 3 yrs" as if the "10% investment is not a risk" there is always risks. The risk in his business making $10k a year is more manageable than one of investing money in the market earning 10% per year. My opinion. The entire basis of my thread is on the PASSIVENESS of his business, he emphasized on that, so I did too. He said, "it's such a passive income" leading me to assume, that he is not putting that much time in it. If he had said, it's so involved, it's like a job, I put in 60hrs a week and have no time to do anything else. I would be yelling on top of my longs to sell, sell, sell! but if it only takes maybe 10-15hrs a month? KEEP IT! Like I said, I have never operated my own business or sold one. But I'm absolute confident that my little opinion/reply on there is rock on solid!

 

[GlobalWealth]

But I'm absolute confident that my little opinion/reply on there is rock on solid!

While I am fairly certain you will take this the wrong way, I am going to say it anyway for the benefit of the community.

There is a big difference between advice and experience sharing. Experience sharing, as the name implies, is based on one's personal experience. For example, my sister got a job years ago as a fnancial planner for a brokerage firm. She tried to convince me to move my money to her firm and let her manage my portfolio. She made about $60k/year and living paycheck to paycheck. I had no interest in her "advice" because she had no "experience" of earning real money.

I have no doubt you have success in your future, but until then, try to stick with sharing experience and learning instead of giving advice that lacks credibility.

(again, this was not meant in a disrespectful way, but moreso to explain a point here).

Now to address your statement. The idea behind the risk of not earning $10k/year means that while the business provides passive income, there is always significant risk. As saying goes, a bird in the and is worth 2 in the bush. Yes, there is risk involved in earning 10% per year. This was an arbitrary figure. I didn't even offer investment suggestions as there are way too many options. I only used the 10% as an example. Pick a number, 5%, 20%, whatever, but you will need to adjust your discount rate accordingly based on your ability to earn a return.

You may be able to take the $22.5k and make a deposit on a nice duplex selling at 40% off in foreclosure. Live in one half, rent the other for the balance of the mortgage and live rent free. If you normally would have paid $800/mo in rent, you have now saved $10k/year (same as earning it) plus the liberal tax benefits you gain from depreciation, etc. Just one thought, there are many, many other.

but of course, I have no idea if his business will sell for $1k, $10k, or $10m. This info hasn't been provided.

 

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[Rem]

Thanks everyone. I can't mention the amount since I signed a non-disclosure agreement but it's between $60K and $70K :smxB:

I have decided not to sell right now since I like the passive income each month. No matter how I run the math it seems like I would benefit short term. About 2 1/2 years into it I would end up losing out. I find that to be too short of a period for me. If it was more like 4 or 5 years then maybe. I may change my mind later if I can either grow my business and sell for more or if I sense the business has reached a peak.

In the meantime, since my income is quite passive, I will be looking for a new full time endeavor and make my current business a side gig.

 

[GlobalWealth]

Thanks everyone. I can't mention the amount since I signed a non-disclosure agreement but it's between $60K and $70K :smxB:

I have decided not to sell right now since I like the passive income each month. No matter how I run the math it seems like I would benefit short term. About 2 1/2 years into it I would end up losing out. I find that to be too short of a period for me. If it was more like 4 or 5 years then maybe. I may change my mind later if I can either grow my business and sell for more or if I sense the business has reached a peak.

In the meantime, since my income is quite passive, I will be looking for a new full time endeavor and make my current business a side gig.

Thanks for the update. Have you read MJ's story? If not, read it where he talks about the exponential rise of his income from his web site biz. Pretty interesting.

 

[EastWind]

While I am fairly certain you will take this the wrong way, I am going to say it anyway for the benefit of the community.

There is a big difference between advice and experience sharing. Experience sharing, as the name implies, is based on one's personal experience. For example, my sister got a job years ago as a fnancial planner for a brokerage firm. She tried to convince me to move my money to her firm and let her manage my portfolio. She made about $60k/year and living paycheck to paycheck. I had no interest in her "advice" because she had no "experience" of earning real money.

I have no doubt you have success in your future, but until then, try to stick with sharing experience and learning instead of giving advice that lacks credibility.

(again, this was not meant in a disrespectful way, but moreso to explain a point here).

Now to address your statement. The idea behind the risk of not earning $10k/year means that while the business provides passive income, there is always significant risk. As saying goes, a bird in the and is worth 2 in the bush. Yes, there is risk involved in earning 10% per year. This was an arbitrary figure. I didn't even offer investment suggestions as there are way too many options. I only used the 10% as an example. Pick a number, 5%, 20%, whatever, but you will need to adjust your discount rate accordingly based on your ability to earn a return.

You may be able to take the $22.5k and make a deposit on a nice duplex selling at 40% off in foreclosure. Live in one half, rent the other for the balance of the mortgage and live rent free. If you normally would have paid $800/mo in rent, you have now saved $10k/year (same as earning it) plus the liberal tax benefits you gain from depreciation, etc. Just one thought, there are many, many other.

but of course, I have no idea if his business will sell for $1k, $10k, or $10m. This info hasn't been provided.

Okay. I didn't just offer a random advice such as "DO IT" or don't do it. I offered my advice/irrelevant opinion with reasons, logics, my thought patterns which is pretty much common sense. I respect experience as wisdom is found in it, but if it doesn't make sense to me. Then I'm not going to buy it. Common sense. Like I said, you must not have read my first post completely, because your reply was talking about opportunity costs, which I did address in that post. So on that account we were on the same page, tho I beg to differ on the risk of not earning money in his existing business vs earning interest in something new.

He is dug in, he knows his current business, he can assess it better, and have an idea of the risks involved. Anything new, is new, including the risks. The risks are better managed in what he has now. On the other hand, sometimes, an unknown risk is still worth taking if there is firm reason to believe that the payoff will be gigantic compared to his current biz. My stupid opinion is based on facts, even if I don't know all the numbers. The fact is he doesn't have anything concrete lined up yet in terms of ideas, the fact is his current biz is very passive, so it makes no sense to just sell for cash, unless he believes the market is dying out. Which indirectly will mean that the buyer is overpaying him. I didn't state that explicitly but that's another reason to sell. If you are being over paid. I think it applies to any business.

1) sell if the business is not passive and more of a JOB than an investment.
2) sell if you have a new idea, and need more time or/and the sales proceed to invest in your new awesome idea.
3) sell if the market is dying.
4) sell if you are being paid way more than the actual value of your business.

 

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[Rem]

Yeah I read his story twice. It's very inspiring and exciting. I may go read it again. I have been at this 5 years and I look at my growth and it is not exponential but a very straight steady growth. I am hoping for that big increase but seems slow and steady. At least it's still growing. It seems no matter how hard I push it grows at its own rate haha

So I guess I may just continue to grow it slow and steady and then start a new business. In 10 years I would like to own several businesses bringing in revenue from a wide array of sources.

 

[GlobalWealth]

Yeah I read his story twice. It's very inspiring and exciting. I may go read it again. I have been at this 5 years and I look at my growth and it is not exponential but a very straight steady growth. I am hoping for that big increase but seems slow and steady. At least it's still growing. It seems no matter how hard I push it grows at its own rate haha

So I guess I may just continue to grow it slow and steady and then start a new business. In 10 years I would like to own several businesses bringing in revenue from a wide array of sources.

The funny thing about exponential growth is that once it starts, it creates a snowball effect. Sounds like you haven't broken out of the linear pattern yet, but that doesn't mean it can't happen.

Of course you need to be in the right vehicle for this type of growth to happen. I don't know anything about your business, so I can't give an opinon, but you will never get to the moon in a schoolbus.

 

[GlobalWealth]

1) sell if the business is not passive and more of a JOB than an investment.
2) sell if you have a new idea, and need more time or/and the sales proceed to invest in your new awesome idea.
3) sell if the market is dying.
4) sell if you are being paid way more than the actual value of your business.

These are not the only reasons for selling a business. I have personally bought 7 businesses and sold 2. On my advisory board there are 7 others who have bought and sold several businesses, and I can say there are as many reasons for selling as business as there are people who sell them. Not all of them are good reasons, but reasons nonetheless.

 

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[EastWind]

These are not the only reasons for selling a business. I have personally bought 7 businesses and sold 2. On my advisory board there are 7 others who have bought and sold several businesses, and I can say there are as many reasons for selling as business as there are people who sell them. Not all of them are good reasons, but reasons nonetheless.

I don't think anyone here is concerned with ALL the reasons. We are concerned about the good reasons. Now, pardon my ignorance, because I really am. But do tell of other good reasons to sell your business, that make business sense.

People can sell their business to cash out and pursue their life desires, perhaps to fund their kids college education, or failing health, etc. Or perhaps they have to move out of the country/state for whatever reason. ETC. Those are good reasons too, but none business related. If sm_media had to sell his business for personal reasons, I doubt he will be asking us nor will we influence his opinion. But his thread is all business, so keeping it all 100% business related. As a business owner, what good reasons will cause you to sell your business, when you still want to be in business and it's not one of the four things I listed. I'm curious and do want to learn. If anyone else knows of more, please do add it. Thanks.

 

[Rem]

I think a may sell later on in a couple years. I just got 2 new sponsors. Outdoor Channel and LL Bean is thinking of advertising on a blog or two in the network. They both contacted me so I thought it was a good sign and wanted to see where this goes before just selling out.

Both are doing smaller packages... getting their feet wet to see if it will pay off. Hope it works out for all of us.

 

[andviv]

Great to know, having these big sponsors and that extra income increases the valuation of your company in a big way... (Around The World and SteveO have addressed this same topic long time ago in reference to RE).

 

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[Rem]

OK I have been in more talks with these people and it sounds more and more convincing. The part I really like is that these people were acquired by Yahoo about 3 years ago and they are a small 20 employee company. I have been doing business with them for 4 years using them as a 3rd party entity anyway. They want to put about 9 people on my business and buy in 60%.

They do have a lot of connections in the industry and it sounds promising. They want to pay me at least what I was making now and my 40%. Of course that cuts into profits but at least I know I am getting paid each month. It may actually mean a pay raise. They want to take over a lot of what I do on the technical aspect. I would do more of the networking and managing the bloggers stuff. So I would get my 60% paid to me to pocket. Then I would get paid probably 50% more than what I am now plus 40% of profits.

I am thinking of doing this. If in 5 years my network is huge then I would benefit greatly. If not, I have gotten paid no less than what I am now.

It almost would be stupid if I didn't with the current proposal.

 

[ScottHardy]

Remember, you also lose complete control since you're selling 60% of the company. If they have a buyer lined up, RIGHT NOW, you'll be out within a few short months. You might be happy with that, but, you have absolutely no say in the matter. I'm sure they'll listen to your opinion but the fact that they get control of your company is concerning.
What would happen if you got outside investment? It looks like you're valuing you company around $100K. What if someone came in and offered you $50K for 40% of the business? What could you do with that?
Do you see the business doubling this year?
Are you looking at explosive growth or just a slow continuous pace?

I would take a step back. Maybe your business will never be worth $1 Million... But maybe it will if you picked up a small investment and put it to work in upgrading or expanding the sites.

Something to ponder!

That's FANTASTIC you're getting offers to buy! You're doing something right!

Good luck!

Scott