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Ask HN: Best practices for quickly selling a small company?
I have a company that makes less than $250k/year in a niche market. I have an offer to co-found a different, unrelated company. If I were to accept the offer, I would want to move quickly. What are best practices for placing a value a company of this size and for structuring a sale?
My goals are:
- get out quickly
- provide continuity for existing customers
- have minimal ongoing responsibility
- not leave money on the table (but otherwise, this is secondary to the first three goals).
Our stats
- sole founder
- 30% growth last year and this year
- 80% of revenue comes from professional services
- three other workers are on 1099 and amount to 1.75 FTE
- sales come from word of mouth
- our professional services are very repetitive and consist mostly of: account management, advice, and web production.
- cost of "goods", including providing the professional services, hosting, and infrastructure are 25% of revenue. Everything else goes to software development.
- our customers include the major association for this niche, which gets us in front of 2000 potential customers each year
- brk 17y agoYou might be able to expect a 5X annual profit sale if you could manage to find a competent investor who wanted to grow it. It's unclear though from your COGS line though if there really is any actual profit, or if you're just managing to cover salaries and necessary R&D efforts. The best way (IMO) to expedite a sale would be to: - Have accurate accounting data for the last 5 years readily available and organized. - Set a realistic price, with some justification of the price ("I am looking for $500K based on year over year sales growth for the last 5 years and a $100K bottom line profit last year. The market is Y and this brand has the ability to grow to own X% of Y based on Z. " Etc.) - Be available to answer questions - Offer to be available (for free or on retainer) for the first 6 months after acquisition to help with any transition items. ...just some thoughts...
- anonfounder 17y agoThanks! There hasn't been any real profit although there's a story to be told about how to make a profit. Most of the necessary R&D has already been done.
- hga 17y agoWell ... one approach would be to find someone like my father (who's 77 now and happily retired). Give him a 1/3 commission, agree on the minimum terms (i.e. the above plus a price) and stand back. However, anyway you look at it, unless you're willing to spend some number of months to do it right, you're not likely to get a good deal. It's always possible, but I wouldn't count on it. And that's one reason to hire a specialist, someone who can play the game without conveying that you want out yesterday. And I've seen my father do this sort of thing, it can be done. Good luck!