Selling a business
Discussion
A good friend of mine has a business which is purely Internet-based, c.£300k turnover, £70k profit, supports 3 full-time employees and has massive scope for expansion into Europe (only sells in the UK presently).
It has a 12-year track record but he wants to retire. Where is the best place to advertise this and any guesses about how much it may be worth?
It has a 12-year track record but he wants to retire. Where is the best place to advertise this and any guesses about how much it may be worth?
littleredrooster said:
A good friend of mine has a business which is purely Internet-based, c.£300k turnover, £70k profit, supports 3 full-time employees and has massive scope for expansion into Europe (only sells in the UK presently).
It has a 12-year track record but he wants to retire. Where is the best place to advertise this and any guesses about how much it may be worth?
£70k net net ie after all overheads AND his salary? if so he has a gold mine. If its £70k gross its less so but try an advert in the Business For Sale online site It has a 12-year track record but he wants to retire. Where is the best place to advertise this and any guesses about how much it may be worth?
As DSLiverpool implies, I guess this is a 23% owners margin and that no salary is drawn.
The 1x turnover giving 4.3x EBITDA seems a little strong to me. Whilst he has been trading for 12 years, it is likely the business model and a similar amount of goodwill can be built up over less than the value and time of 4 years of EBITDA, or at least that is how I would look at it.
What sector? Premises? Skills required?
coyft said:
If it's all been fairly constant for the last few years I'd say it's worth about £300k, but there are so many variables.
You must be a business sales agent 
In all seriousness OP its so tiny that it makes sense to sell it to a rival who can run it in parallel or absorb it saving circa £50k in staff, premises etc.
Tell him to get notification to his competitors initially anonymously.
DSLiverpool said:
£70k net net ie after all overheads AND his salary? if so he has a gold mine. If its £70k gross its less so but try an advert in the Business For Sale online site
70k before salaries, I believe.loafer123 said:
What sector? Premises? Skills required?
Consumer goods, niche (-ish). Warehouse, no retail, a little market knowledge required, but mostly stable with established suppliers and own Brand Name on goods. Other than that, how to wrap delicate things for posting!trickywoo said:
Is there anything special about it that one or more of the current employees couldn't just set up themselves doing the same thing?
Probably nothing, except that the current ones have no real business acumen and tend to follow rather than lead. One has been there since the start and still doesn't know who the suppliers are, how to reorder, how to manage stock levels etc. Lovely lad, though!littleredrooster said:
Stuff
I'm no expert but based on your update I'd have thought the best sale for everyone would be a staff buyout.I can't see it being worth more to an outsider than those already working there so that is likely to generate the best price, assuming the staff can afford it.
Assuming it's a limited company I'd expect the £70k will be profit after the 3 full-time members of staff have been paid and the owner will take his share in dividends. How important is the owner to the running of the business. Can it function well without him for extended periods or does he need to be there daily to keep the cogs turning?
I had a chat about this with my wife, who owns an internet retailer.
Our conclusion, following the debate, was that if the £70k is before owners return, and assuming a full time manager is required, then knock off the cost of that manager at, say, £35k and value the remaining EBITDA at 5x (i.e. 20% pa return for risk capital), giving £150k.
Where are they based, as that would affect things?
loafer123 said:
I had a chat about this with my wife, who owns an internet retailer.
Our conclusion, following the debate, was that if the £70k is before owners return, and assuming a full time manager is required, then knock off the cost of that manager at, say, £35k and value the remaining EBITDA at 5x (i.e. 20% pa return for risk capital), giving £150k.
Where are they based, as that would affect things?
Without knowing the items sold you cant make any guess as the barrier to entry is so low on the net that your £150k buys you a (probably outdated) website and an Amazon & eBay & NotHS accounts. All easy obtainable in short time. Our conclusion, following the debate, was that if the £70k is before owners return, and assuming a full time manager is required, then knock off the cost of that manager at, say, £35k and value the remaining EBITDA at 5x (i.e. 20% pa return for risk capital), giving £150k.
Where are they based, as that would affect things?
The value of this company is in the supply chain and I assume to give such a high gross margin its on favourable terms and very specialised. (I realise the OP says not but to get that return on say china mugs is not going to happen)
DSLiverpool said:
loafer123 said:
I had a chat about this with my wife, who owns an internet retailer.
Our conclusion, following the debate, was that if the £70k is before owners return, and assuming a full time manager is required, then knock off the cost of that manager at, say, £35k and value the remaining EBITDA at 5x (i.e. 20% pa return for risk capital), giving £150k.
Where are they based, as that would affect things?
Without knowing the items sold you cant make any guess as the barrier to entry is so low on the net that your £150k buys you a (probably outdated) website and an Amazon & eBay & NotHS accounts. All easy obtainable in short time. Our conclusion, following the debate, was that if the £70k is before owners return, and assuming a full time manager is required, then knock off the cost of that manager at, say, £35k and value the remaining EBITDA at 5x (i.e. 20% pa return for risk capital), giving £150k.
Where are they based, as that would affect things?
The value of this company is in the supply chain and I assume to give such a high gross margin its on favourable terms and very specialised. (I realise the OP says not but to get that return on say china mugs is not going to happen)
Zoon said:
I'll buy him out if the figures are post salaries.
If you are serious, PM me.loafer123 said:
Where are they based, as that would affect things?
Oop North. Cheap overheads, but could potentially be operated anywhere if needed....and in reply to whoever asked about owners hours of work - he currently does <30 hours/week at the warehouse and however many are needed at home sorting out queries. There is no current website for direct sales (which I think is a tragedy) as it is still 'under construction' by an outsourced company, and all sales are via Ebay or Amazon with resultant fees.
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