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Ask HN: Does my company with $140,000 annual revenue have any value?

• jacquesm 16y ago
  The value in your business is you, with the exception of the license fees. So any buyer will want you as a part of the deal, expect to have to stay on for 2 to 5 years depending on how specialized your knowledge is. Also, if you are selling a business that small consider building it our yourself first and train your replacement while you're at it. That way an exit becomes both more likely and much more profitable.
• miles 16y ago
  I would predict $25,000 per year could be made without answering any emails or doing anything Then it might be a better value for you to keep the business (while putting little to no effort into it) and consider the $25k/yr an annuity of sorts. In four years you've got a hundred grand, which should offset the grad school expenses nicely.
  • zacharyz 16y ago
    I agree - perhaps take on some outsourced employees that can handle the repetitive stuff when it does occur.
• kinlane 16y ago
  I learned this the hard way 2 years ago while going through my divorce with my wife. We had both built up our web app development business over 8 years. Income was 120-150K. But without "both" of us working the hours....it soon wasn't worth anything. I was able to liquidate the clients for 5K. This was due to poor planning, documentation of process and of course a divorce. (so communication was somewhat an issue). You would really need to define the business...every nut and bolt...and module that drives it. Then the processes that go with it. Then if you could quantify that to someone, and show how it makes money when operated correctly you might be able to get some money squeezed out of it for grad school. The likelihood you will get lump sum is small...but more like you could get a residual with maybe a balloon. Let me know if you need help packaging it up. I'm helping my current employer with this now....info@kinlane.com
  • jaxn 16y ago
    I really hope you didn't get screwed in the divorce by taking the business. Valuing a small business in a divorce is tricky.
• dkuchar 16y ago
  My first business was incredibly similar to yours in terms of success. A partner and I share about $75K/year in profit, and at this point we only answer occasional technical support (no custom development or contracting). Neither of us were looking for the additional contracting work that you take on, we instead regarded this as passive income, and took the liberty to travel and relax. I've now moved onto a new (bigger/riskier) project full time (with another partner), with my month-to-month financial burden still being taken care of by this first business. From my experience, what I'd suggest is that, if you haven't already, build out incredible demonstrations, tutorials, how-tos, videos, etc for your customers, in an attempt to render yourself as useless as possible (on the contracting side). Then I suspect (based on the particulars of your business), that you could just maintain the project for some amount of time, only fixing problems, enhancing support materials and answering technical support, while earning significantly more than the $25k you suggest. I say some amount of time because these things don't last forever, especially if you aren't growing it. But to me this doesn't sound like a killer business - it sounds like some passive income that you can use as a stepping stone to the next big thing in your career. So don't sell it. Round it out with a last big push, turn it into a solid source of passive income, and let it fuel your future endeavors. If you want to talk about this more in private shoot me an email, it's in my account info.
• ibgeek 16y ago
  Keeping the business may be to your advantage. Stipends at graduate schools are often around $25k/year, so your business would allow you to make the same amount of money with almost no effort. Since they are often funded out of professors' grants, you're limited to working with professors who have funding and have to do their research. If you keep the business and fund yourself, you'd basically be able to go to grad school almost anywhere you wanted and do research in whatever area you wanted with almost anyone.
  • hadley 16y ago
    As well as paying your (meagre) salary, the funding usually also covers your tuition. So while $25k / year will cover your salary, it won't also cover your tuition.
• ibgeek 16y ago
  Keeping the business may be to your advantage. Stipends at graduate schools are often around $25k/year, so your business would allow you to make the same amount of money with almost no effort. Since they are often funded out of professors' grants, you're limited to working with professors who have funding and have to do their research. If you keep the business and fund yourself, you'd basically be able to go to grad school almost anywhere you wanted and do research in whatever area you wanted with almost anyone.
• vetinari 16y ago
  To assess the value of the business you would have to look into finacial statements. You are incorporated, after all, but I suppose you don't have many assets and liabilities (I might be wrong though). Revenues do not say much, you must subtract costs of running the business. To do that, you must also decide, what is your wage (or what would cost to hire someone to do your job) and what will be left as the profit. To simplify, the value of your business is present value of future profits.
• apowell 16y ago
  Here's my off-the-cuff analysis based on the limited information you've provided: Keep it. The consulting business is worth very little, I think you're right to view it as "selling a job". Take it out of the equation for now. You have $25k - $35k in passive product-based income. That's your sellable asset. So what's it worth? Three years of demonstrated profit would probably be a fair selling price. Based on that you're looking at about $75k pretax. Why do that when you can just sit on it for three years, realize the profit, and still have a business that generates income? If you don't want to do any more consulting work but have recurring business coming in, consider finding a trusted developer who can assume your clients and will pay you a commission on future billings.
• omarchowdhury 16y ago
  If you're billing at 150 to 250, I'm sure you could hire someone at 50 to 75 to do all the support work full time.
• genericbusiness 16y ago
  While we're discussing this: I've written some software that generates approximately $200k/year in passive income (and growing), with almost no ongoing maintenance or support required. Anyone working on it full time could double it quite quickly, I think. (I'm working on some other projects.) At that level, how should I go about selling it?
  • lftl 16y ago
    $200k/year is probably pushing the amount that would be worth trying somewhere like flippa.com, but I have seen a few businesses in that range there. Bizbuysell.com has a lot of businesses more in that ballpark, and if you want to be a little more proactive in selling it you could talk to a business broker about selling it.
    • jacquesm 16y ago
      Better read the fine print really good, business brokers worth their money are very hard to find and it's easy to get locked in with some shyster that will bank on you selling your business eventually and him pocketing a part of the sale. They're worse than real estate agents.
    • jacquesm 16y ago
      I've looked through 'bizbuysell.com' a bit, there are lots of real businesses there but also quite a few that look like the online equivalent of 'pump-and-dump'. If you go there as a buyer looking for an online business better do your homework real well.
  • honopu 16y ago
    if it is truly passive why in the hell would you want to sell it? There's passive(stock dividends) and passive(almost no ongoing maintenance), those are two entirely different things, one doesn't require any thought, one does.
    • weaksauce 16y ago
      The reason for selling businesses that are passive income is threefold from my point of view: 1. Without maintaining the website/business you run the risk of being overtaken by a newcomer and lose your passive income. 2. Even passive businesses take some amount of work. For example you need to file your paperwork / sales tax / taxes / everything else related to the boring side of things. Even if you have people to do those things you still need to talk to them to make sure it is getting done. 3. If you want to turn that 200k income stream into some other business with more potential you can get 200k * X where X is the multiplier that you get for selling now. you can then take the 200k * X and invest that into some new thing.
• honopu 16y ago
  So you are billing out 110k a year which is 733 or less hours per work a year. Somewhere between 110k and 733 hours of labor is an asset you are just looking to throw away. If you look at subbing it out to someone else(though they get full source, i mean they have to) and if you pay this/these guys 60/hr, you are looking at paying out around 44k-ish a year plus lazy bloat so probably 60k a year. You should hopefully realize you have built something pretty awesome, you are just missing the steps covered by: http://www.amazon.com/E-Myth-Revisited-Small-Businesses-About/dp/0887307280 http://www.amazon.com/E-Myth-Revisited-Small-Businesses-Abou... which basically means that you need to put processes into your system where you can sub yourself out as needed and someone else can handle this. Support requests and RFQs going to your personal email aren't conducive to this. Using things like zendesk, some other support app etc would be really beneficial. So really you have 25k a year + a hose of consulting money you can divvy up/spray around as you see fit. You really have something cool here, you should value it correctly. People buy jobs all the time, isn't that what college is all about?
  • hartror 16y ago
    Excellent point and I hope webdev2010 pursues it. I'd just like to add a cautionary note that shifting a business to this footing takes time and that in all likelihood there will be bumps in the road. But having a relatively large relatively passive income while at grad school would be totally worth it.
  • barmstrong 16y ago
    e-myth is a great book to check out another one I liked is: http://www.amazon.com/Built-Sell-Turn-Your-Business/dp/0986480304/ref=sr_1_1?ie=UTF8&s=books&qid=1278230624&sr=8-1 http://www.amazon.com/Built-Sell-Turn-Your-Business/dp/09864...
• csomar 16y ago
  Idea: Don't sell it. You are profitable. Hire a geek, let him learn the framework and do custom development for you. Take a part, for example, if he bills $120/hour you take $20/hour. You'll also make passive money selling licenses. Hire a customer support person if you don't have time to do it yourself. You can hire it remotely; but I prefer that the developer is hired locally. HN, please comment on my idea, as I don't have any real-life experience.
• slay2k 16y ago
  You realize there are highly skilled, entrepreneurial people willing to work for $100-200/hr, right ? Especially part time. I'm your inverse in the sense that I'm done w/ grad school and now doing freelancing/consulting to fund my own web-based projects. Hell, go get your degree and I'll grow your business while you're gone, all the while kicking back 20-25% of consulting income. So you'll make a passive $60k+ a year while continuing to own your operation. And I won't have to spend time looking for clients. Trust is a real issue, of course, but there are genuine hard-working people out there. If you want to talk more, my email's in my profile.
• skurland78704 16y ago
  Keep it; a decent income would've made grad school significantly less painful. 500 hours a year is not a full time job; I think your odds of selling it at the price it's worth to you are very low.
• JohnInParadise 16y ago
  There surely is value in the business there. One basic formula for business valuation is 110% of annual gross revenue + the value of any hard assets. The recurring license revenue is nice. The billable hours are a little difficult to value though since they are very dependent on you skill set. If you are doing something fairly unique, and the buyer can't be trained easily or successfully than it might be hard to honestly justify that revenue when negotiating a business value and price. What are you marketing and advertising costs now? If you say "basically zero" then you might have a lot of untapped potential value. Since you are not interested in running a business and hiring people, I'd suggest selling now. It'll take a few months to find a buyer and a few months to close a deal so might as well start now. To paraphrase Warren Buffet "no one ever lost any money by taking a profit". On the other hand, $2k per month of passive income while in grad school is a great way to live and study and work without a lot of added stress. I wouldn't take less than $125k for it, cash (don't carry a note for the buyer). And offer the buyer 40-80 hours of training over the first 2 months.
  • webdev2010 16y ago
    Marketing costs are around $350/month for some simple BuySellAds spots. I think the ideal purchaser would be a web development company or enterprising web developer (PHP programmer with frontend skills too) who is willing to pay ~$100,000 up front for a growing and proven business, the client leads, etc. However, I'm not sure if this is possible to find.
    • JohnInParadise 16y ago
      I think a buyer will be findable. Not easy but surely one or more are out there. You have enough business savvy to find customers, use the same savvy to find buyers.
    • ttol 16y ago
      whats the language/platform of the software? how many customers/users are there currently?
      • 16y ago
• japherwocky 16y ago
  Hire an intern, teach them how to do the tech support, collect a check. I think you'd be foolish to get rid of it. I'd happily support it for you and pass on a cut of the earnings. ;)
• mma 16y ago
  How can I contact you if I'm interested? My gmail account is mattmarksmail.
• dennisgorelik 16y ago
  Why do you want to go to grad school if you have successful business on your hands? It looks not only a successful business, but also such a business that allows you to do your own research part time. That kind of research should be more efficient that what you would get in academia.
• anbyr 16y ago
  If you are interested in selling - send me an email anbyr1010@gmail.com That hopefully answers your question around value vs job.
• dansari 16y ago
  I'm also interested in helping you out as a skilled developer - please contact me on gmail at ansari.daniel.
• LookingToBuy 16y ago
  apologies for the throw away account. Am guessing you've probably made your mind up by now which way your going to go so if your selling it on, I may have some buyers for you, contact me off list on: throwawayaccout2010@gmail.com happy to sign NDA before code review/discussion starts. throwawayaccout2010@gmail.com
  • webdev2010 16y ago
    I'm not interested in selling right now. I am running and growing it over the next 6 months, at which point I will look for a buyer.
• fabiandesimone 16y ago
  Any way to contact you?
• deleted 16y ago
  [deleted]