Selling my business. How do i go about it?

[sswats]

I have an e-commerce business that I have been running for 10 years. It's profitable but I just have a new opportunity elsewhere.

So question is, who can help me value the business and help me find a buyer? Any broker recommendations? Is there a way to calculate a ballpark figure to set my expectations?

 

[Clinton]

Good luck!

 

[pentel]

Less than 20% of small businesses for sale find a buyer.

 

[fisicx]

The type of business often has a bearing on the value. If it's something you do in the spare room with hours tied up in processing orders, doing marketing and so on then the value falls sharply.

If it's a fully automated fulfillment business where all you need to do is keep an eye on things then it's worth a lot more.

How profitable is it? Enough to pay your bills or just enough to supplement your income?

 

[Paul Carmen]

Tell us about the business, the website, its turnover, profitability, shipping & fulfilment etc & someone can advise, or may even be interested in buying it.

At the minute you've said, I want to sell a thing, can anyone help...

 

[sswats]

I didn't want to publicly advertise it for sale on a forum yet, as it's still in the consideration stage. I just was hoping to speak to a trustworthy broker to get a ballpark valuation.

We refurbish computers and laptops. It is profitable, but not automated. Customers visit our website to sell their devices and get a quote, we collect, test and pay. So that website gets 6000 relevant visits a month and generates about 400 leads a month. Some sell individual units, and some selling in the hundreds. This is Search results only, not through any advertising. I currently do not advertise at all.

It's a full-time job. e-commerce aspect is new as we used to own a retail shop. so pivoted to e-commerce exclusive about 3 years ago.
Our e-commerce sales are increasing from £130k 3 years ago to 240k the year after, 260k last year and are on track to reach 280K this year. Profits averaging approximately 30% of the revenue.


What are the alternatives to selling completely?

I have the option of letting my current technician take over the work, but I am not sure how to structure it so i can retain a percentage of the profit instead of an upfront fee.
I have no business acumen at all. Are there any examples of how this can be done?

Thank you

 

[Paul Kelly ICHYB]

I just was hoping to speak to a trustworthy broker to get a ballpark valuation.

To get your business, they might just over value it a little!

Profits averaging approximately 30% of the revenue.

Does that include your/all salary?

 

[Clinton]

To get your business, they might just over value it a little!

£1 would be an overvaluation!

This is a job, the guy works full time in the business.

It's highly reliant on organic SERPS (FFS, why do people think this is a good thing? It's horrible, horrible, horrible. To a buyer it screams RISK. Your entire investment is flushed down the drain if Google's algo drops you. And there's not even a way to protect against this risk without rebuilding completely new sales channels)

It's a B2C in a mega aggro sector - selling second hand tech items to end users.

The owner confesses that he's got no business acumen (read that as code for lack of proper systems and processes, lack of proper financial controls, lack of contingency plans etc etc. i.e someone who's winging it from one day to the next). This will likely be a nightmare to DD.

Advice to OP: Start not by talking to a business broker. The good ones won't even speak with you, you're far, far too small for them to bother with. You'll get only (or mostly) the crappiest of brokers willing to "do a free valuation" or whatever!

Start by talking with your accountant and a good commercial solicitor. Yes, you'll probably have to pay. And they'll probably advise you that you don't really have something here worth selling.

It's not impossible to find a buyer, but what you're looking for really is someone local with more money than sense and who's unemployed/looking for something to do. Or give the business to your employee, if he wishes to take it on, and get a solicitor to draw up a proper contract for him to pay you a bit of money in the future.

 

[Paul Kelly ICHYB]

Delivered like a brick in the face, but Clinton is spot on!

 

[Mark T Jones]

Delivered like a brick in the face, but Clinton is spot on!

AKA 'the Clinton hug'

 

[sswats]

To be honest I didn't think my business was actually worth a lot because you are right, it's not run very well. But I thought I would ask rather than just close up.
However, I thought the website itself has value as an asset. Guess I was mistaken. So if I close the company I just abandon the website, it's also worthless?

With regards to giving it to the current employee, I obviously need to discuss this with them before speaking to a solicitor. How do i make the offer to them? Do I take a commission on the sales, or does he start a company and give me shares? Any examples I can have a look at on how people make this transfer that we can discuss?

 

[Clinton]

I can see the reluctance to just waste the website (and it's current rankings).

Your options:

1. Have a competitor take it over, as is, and pay you for it. Problem is, they'll want to pay based on the profit they generate from the traffic the site gets. That's difficult to calculate and impossible for the vendor to track without detailed access to the buyer's accounts.

2. You could sell a 301. But that isn't great either. A 301 will result is the Google ranking disappearing pretty fast.

3. You could load the site with ads, affiliate program links etc. You'll lose the organic rankings in due course but you can make some money in the meanwhile.

The latter is what I did. For many years I owned highly competitive terms in SERPS. This page of mine, for example, was #1 in SERPS for "make money online". For years! It made me £10K+ a month in Adsense alone. I had a completely crap page for ERP software that was #1 for the term. Also "CRM software", "cheap laptops" and many more. For those who know what Adsense Fedex accounts were, I had multiple Fedex accounts. But I got bored, had other interests in life, and just ignored those sites, stopped updating, let them slide into oblivion. I don't know what the current rates of attrition are, but I suspect that if you do it properly you can make a few grand from affiliate programs etc before the site dies in the organic results.

What you do with the employee is completely open to negotiation and based on what he wants, the level of his ambition, his tolerance for taking on business risk and hassle ie setting up a Ltd company etc. If he's interested in taking this over why don't both of you go see this solicitor together just to discuss options?

 

[ecommerce84]

What are the alternatives to selling completely?

Is it not possible for you to retain ownership of the company and keep the technician as an employee - which he presumably already is?

If there is too much work for one, is there enough margin to hire a second technician?

You say you have no business acumen, but you must have some as you have built up a business that can support you and your technician, which is a lot more than some self proclaimed “entrepreneurs” ever achieve. You may not be able to run a FTSE 100 company but could you run a company with a couple of employees whilst doing whatever else it is you wish to do?

If you are dead set on selling the I’d follow the advice in the final paragraph of @Clinton last post

 

[sswats]

Thank you Clinton. That's very helpful.
I will implement Adsense immediately as I can do that in the meantime anyway.

I don't plan to retain ownership. But I was thinking along the lines of taking a commission or having shares in his company. Or he gives me a salary during the transition stage. I don't know, I've never been involved in a company sale. It's not essential I retain anything, more of an I feel like I've wasted the last few years if I don't get anything out of it.

Thank you for your comments. Hopefully, I will learn to be better in my next job. I spent too much time dealing with customers in this one that I've stagnated in technical and other areas quite a bit. One of the reasons I want to move on.

Anyway, I will discuss it with him, describe everything involved and see if he is still interested. He probably should take in an employee, and he has mentioned his brother wants to work with him. But that will be up to him.

Thank you for the help.

 

[Clinton]

Adsense is the easiest to implement, but it is the laziest and you could probably earn more on other programmes. However, you may not want to spend the time and effort if you're abandoning the site.

But don't go for Adsense just yet. If someone's taking the business over, and gets independent legal advice, they may see the Adsense on the site as devaluing the business. Discuss with them first.

I don't know, I've never been involved in a company sale.

I have. There's no hard and fast rule. Everything, but everything, is for the two parties to discuss and agree between themselves (and then get written into a proper legal contract). He could buy your limited company. Or just buy the website and other assets (either in his personal name or in the name of a new limited company he sets up). Whatever the option, there are all kinds of other implications. Like if he buys the assets, it's a nice clean start for him but you're left with winding the old company up. There are various potential problems with all options which is why you need a good solicitor to wrap everything up properly.

You should give yourself some credit for running this thread differently to others who have started threads like this one, and for taking advice. I hope you do well. All the best.

 

[IanSuth]

You should give yourself some credit for running this thread differently to others who have started threads like this one, and for taking advice. I hope you do well. All the best.

I was going to say the same - this thread is a breathe of fresh air compared to the usual ones where owner says I want to sell for squillions cos it is the best idea ever - Clinton says "I have seen this a thousand times - be realistic" owner throws a paddy explaining why Clinton (who has been involved in more sales than any of us) is wrong

 

[dylanmarlais]

It may be that your employee is a likely buyer. He knows the business and 30% of £280k a year is nothing to be sniffed at.

But he may not have the money to buy it. So you can structure the payment accordingly and base it on a share of profits over the next few years or turnover.

The price could be structured as a loan guaranteed by the company and secured on the assets of the company. Or unsecured if that’s what can be agreed. Or as outstanding consideration that is not a fixed amount but that is based upon the profits etc.