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Ask HN: Selling my profitable side business. Interest/Advice?
Hi HN! Posting this for a friend to keep his identity private. He'll respond through my account, and wrote all the text below:
Hello HN! For 5 years, I've ran a highly profitable side business. While the business requires very minimal maintenance, I'd like to focus my attention on other ventures. The site continues to provide a fantastic income, but the obligation to maintain it still exists in my head, and I'm ready to release myself of that obligation. I've never sold a business and I've been a longtime HN user and contributor, so I'm hoping that the community here can provide me with advice or even a buyer.
This sale represents a huge learning opportunity plus some financial security. By purchasing this business, you'll gain access to a production-quality website that has been profitable for half a decade. You'll gain the foundation to massively grow this into a much larger business, and you'll already have a customer base that loves and believes in the product. So whether you're an experienced entrepreneur looking for something new, a new entrepreneur looking to have a solid start, or just someone looking for some fantastic side income, this post should interest you.
Below are the financials, maintenance, and tech information about the business. I'm going to keep the product itself private except to interested buyers.
# The Numbers
Users: 5522
Revenue (last 12 months): $76,201
Expenses (last 12 months): $2,521
Maintenance:
* During peak periods, there are ~2 support emails sent per day.
* Technical maintenance is sometimes required, average 4 to 8 hours per business quarter.
Technology:
* Python
* Tornado
* PostgreSQL
* AWS for hosting
* Twilio
* PayPal
Thanks! If you're seriously interested, please email me at hnbusinessinterest@gmail.com and I can give a more detailed rundown of the entire product, revenue numbers, etc.
- ChuckMcM 14y agoSo say more about this : "I'd like to focus my attention on other ventures." 2 emails a day? 4-8 hrs of ops work per quarter? That is a pretty trivial amount of 'distraction' (compared to say raising a child while working). So this is where I get lost, if this is true it would be trivial to actually hire someone to be your email responder (they can be anywhere, so someone with a detailed FAQ and a solid command of the English language (or what ever is the primary language of your users) could do this for maybe $7500/year. (that is paying them $20 for each email they answer) And a contract sysadmin, say with an open contract at $150/hr that 8hrs per quarter is another $4,800/yr so call it $12,500 in 'additional expenses' taking that from your revenue nets you on the order of $60K / yr still rolling into your bank account and you have 99% of your time to work on other stuff. (you'll still have to 'watch' things but you don't have to 'do' things). I'd love to know why you are selling it. That said, one way to price this is to consider what the expected rate of return is. So given our $60K/year revenue you could invest $180,000 have it make zero interest and withdraw it at $60,000 a year and in 3 years you would be out of money. Personally, I'd consider anything over $180K to be too much to pay for this business. But the assumption is that I am only confident that the business will run reliably under new ownership for 3 years. On a regular investment instrument I'd want to know what the final value was (at the end of the term) and a pessimist will assume zero and an optimist with assume they can re-sell the business for what they paid for it. If you are an optimist you might ask "how much can I invest, at what rate, to give me a net $60K/yr return?" Well at 5% simple interest that is $1.2M. Since we're not counting taxes in our 60K number we'll assume that both returns can be 'income' grade (which is to say taxed as regular income). If you can show that the business has a 20 year lifetime then something along those lines would inform a higher valuation. So my advice to you on pricing a business is to ask this simple question, "What other choices does someone have which can get them this return at a comparable risk over this time frame? And at the end of the term how much value is 'left'?" That is the key to understanding what is a 'good' price vs an 'unreasonable' price for a business.
- pearkes 14y ago> So say more about this : "I'd like to focus my attention on other ventures." Yes, maintaining this on my own is trivially easy. Then you went on to describe hiring people, managing contracts, etc. etc. That is exactly what I _dont_ want to deal with. This isn't about money, this is about having short term capital to focus on something I'm truly passionate about (not this side business). The fact is, while I still own this business, I'm still responsible for support and maintenance. It is trivially easy, but I don't want to do it. For very interested parties, I'm making it very clear what the business is and doing my best to prove to them this is no scam, there is no "catch." I just want to work on my passion. > So my advice to you on pricing a business is to ask this simple question, "What other choices does someone have which can get them this return at a comparable risk over this time frame? And at the end of the term how much value is 'left'?" That is the key to understanding what is a 'good' price vs an 'unreasonable' price for a business. If they did nothing to this business, I'm confident it would continue to churn out the revenue it has been. That being said, I have many ideas to grow this business further, and I've been sharing them with interested parties. Also, I'm only looking for a buyout of about 1 year of revenue, not 3x. Simple.
- danso 14y agoWow, that's a nice margin. So...obvious question: adult business?
- pearkes 14y agoNot an adult business. :)
- 1337biz 14y agoIt would be helpful if you could at least hint what kind of business we are talking about. The low maintenance/development/support could even hint at a physical product, i.e. that we are in the worst case just talking about some drop shipping business. Of course I can understand that you don't want to have a bunch of copycat sites popping up, but since this is a public forum it would be great if you could at least give some rough ideas, e.g. if you are in the SaaS category.
- pearkes 14y agoThe service is completely web based and automatic. It requires no human intervention except in the case that technical maintenance is required. i.e. no shipping any products. The service DOES depend on web scraping, and this is what causes the technical maintenance from time to time. (And no, it is not scraping Craigslist, haha.) Building copycat sites would be... hard. The market is niche and the integration is not easy. I provide SaaS to the academic market.
- rscott 14y agoYou can use Flippa.com for this sort of a sale.
- wtracy 14y agoIs there any reason you're not naming the business in your ad? While I'm writing, could I convince you to share some sort of post-mortem afterwards? I've off an on thought about doing what you're trying right now, and I love to hear what did or didn't work for you.
- pearkes 14y agoThe reason is mostly because the business makes a surprising amount of money for what it does. In general when I ask friends/family how much they think it makes, they say, "I don't know, a few thousand per year." And these are people IN the tech industry. I'd like to keep the much more profitable truth a bit quiet, except from interested parties. I'd consider doing a post-mortem if the buyer would allow it. If not, I can always do an anonymous one.
- blacksmythe 14y ago>> If not, I can always do an anonymous one. It is not fair to the buyer to give out any info after the sale that you wouldn't be willing to give out before the sale.
- pearkes 14y agoOf course not, I would never do anything to jeopardize that. I'd only post if I could do so in a way that both parties approved.
- thebigkick 14y agoIs there a physical inventory involved?
- pearkes 14y agoNope.
- nilsbunger 14y agoCan you say what kind of users you serve, and whether your revenue derives from ads or freemium or other paid offering?
- pearkes 14y agoI serve students in universities. The product cost they purchase is low (average product cost is less than $10), so they can afford it. I sell actual services. No ads. No freemium.
- codegeek 14y agoIs this a fixed sale per user per month (like a SAAS) or a user buys things with variance dependong on what they specifically needed to buy ? I am asking because you have 5500+ users with 76K revenue. Simple math says you make less than 2 dollars per user per month. So I am guessing it is more like one user buys stuff for 20 dollars while 20 other users did not do anything in a single month ?
- nilsbunger 14y agoSounds like a cool business!
- Khao 14y agoI could take it off your hands but I don't have any money to actually buy it. What if you keep 80% of the income and I take only 20% and all the expenses? Seems like a good deal, no hassle and you keep income for years to come!
- TamDenholm 14y agoPretty sure everyone here would be willing to offer those terms.
- codegeek 14y agoDoes this site make money by charging users OR is it ad based ?
- pearkes 14y agoCharges users. No ads.
- deleted 14y ago[deleted]
- kaa2102 14y agoYou could go to an accounting firm that specializes in valuation for tech businesses. They could help value the business and leverage their network to find potential buyers.
- SkyMarshal 14y agoThis isn't asking for advice, it's pitching a sale. Title is misleading, and the cynic in me suspects that is intentional. PS - nothing against selling businesses on HN, just don't hack our collective desire to read advice on selling businesses to get your submission to the front page. PPS - a suggestion for an alternative: "Selling profitable business, first time, first dibs to HN for your advice". That offers value for value, is straight up about your intent, and would probably still get it to the front page.
- pearkes 14y agoI've gotten very good advice in this thread. It is also a pitch, because HN is a good community for this sort of thing. I'm sorry the title mislead you. Edit: I changed the title to better reflect the intent. Thanks for the feedback.
- SkyMarshal 14y agoThanks, when I posted there was no advice in the comments, just inquiries related to buying it. Upvoted, good luck!
- dggrjx 14y agoWhat is your ratio of repeat to first-time customers? What's your customer lifetime value?
- pearkes 14y agoI serve university students. They stick around for an average of 4 years (no surprise there). They're mostly repeat customers, but of course I get a surge of freshmen every year. I love freshmen!
- jawns 14y agoIs there anything ... er ... morally questionable about the business? Like, fake term papers, etc.?
- pearkes 14y agoNO!
- brador 14y agoAre you allowed to say the traffic ratio Google vs paid ads? Is it heavily dependent on search?
- pearkes 14y agoNo ads have ever been purchased. All traffic is from word of mouth, believe it or not.
- paulhauggis 14y agoAre you paying for any marketing? If so, what kind of marketing are you doing?
- pearkes 14y agoNo marketing.
- paulhauggis 14y agoHow did you get your customers?
- tocomment 14y agoI'd also be curious to hear advice for potential buyers? What are good questions to ask? How can you tell how stable the business is, etc. I've thought of buying sites on Flippa before but I always get worried they're scams.
- jbigelow76 14y agoThe answer is (probably) in the metrics: -Check the LTV for members, is it going up or down? -What is the number of rebuys a typical customer usually makes? -What is the usual cost to acquire a new customer, can that be improved upon? More ephemeral: - Identify if the business has "wide moats" [1] - Can a google algorithm update wipeout your traffic? Is organic google traffic even your biggest traffic source (OP, said "word of mouth" not sure if he meant literally or organic SE traffic) - Are there any competitors? - OP said the site depends on some scraping, any worry that the scrapee may cut off your access? etc, etc, etc Lots of stuff springs to mind without knowing the actual site being sold. [1] http://www.investopedia.com/terms/w/wide-economic-moat.asp#axzz28GgXxlLL http://www.investopedia.com/terms/w/wide-economic-moat.asp#a...
- gacba 14y agoSince you asked, I can point you to a website I run that answers that exact question: http://howtobuyawebsite.org http://howtobuyawebsite.org I wrote an ebook on that very topic to help answer those particular fears and concerns for first-time or new buyers.
- tocomment 14y agoSome feedback for you. It's not obvious how to buy the book. There's no link on the first screen to buy the book except the menu bar at the top. And the "buy the book" menu item is already highlighted which made me think I was already on that screen.
- tocomment 14y agoI entered my email but I never got chapter 1. It just took me to a subscriptions page.
- 14y ago
- sharemywin 14y agoUse http://www.bizbuysell.com/ http://www.bizbuysell.com/ or one of the other business sales sites. or hire a business broker.
- joefarish 14y agoThis wouldn't be http://kiip.me/ http://kiip.me/ would it?