Selling a one person business
Discussion
Hi all, after some advice. For the last 10 years I have run a consultancy based B2B limited company providing design and project management services (during implementation phase) of interiors for a couple of niche sectors. The business works on a project by project basis, but almost all or our customers are long term, some very loyal, issuing repeat orders (but none are tied to a retainer or longer term contract). I have some good connections within the industry and we acquire work organically rather than having to market or advertise ourselves. Annual turnover is roughly £350k, and the individual projects tend to vary between £20k and £60k. I am sole director, we have one part-time employee (my wife) in an administrative role, but other than that I rely on a tried and trusted network of specialist freelancers to support our project delivery.
The business has provided a good income plus a decent pension and other investments, but now that I’m in a position to retire within a couple of years, I’d like to exit the business but also make some use of the value of the client relationships and track record we have built up. I’m 47, so probably won’t actually retire, but I do fancy a new challenge, or perhaps a lower stress role for a while, giving me some more time with family, kids, etc. I am aware that the business is essentially just me, and it has no long-term contracts past about 9 months in advance, so values would reflect this.
There are plenty of other companies small and large within our industry doing similar and we have some very juicy client names on our roster. I did try to sell the business a couple of years back but the industry was still recovering from Covid to some extent, I had quite a bit of interest but the offers I had in at the time were not what I was looking for. Potential buyers raised concerns that the business was just me, in other words I am the business. So I parked it for a bit.
So looking to go again, but might need to seek to structure the deal a little differently, based on some sort of revenue share. The aim would be for me to approach other business owners in the same sector and offer to work with them for 2-3 years to transition my clients across to them. For this there would be a fee paid to me each year based purely on the profitability of those clients and projects actually transferred. I would imagine that the fee would decrease over say 3 years, perhaps starting at 75%, decreasing in stages to say 50%, 25%, etc. After 3 years the clients are theirs. Any new clients I secure during the transition period could also be transitioned under a similar arrangement (on average I tend to pick up around 1 new client a year through my current connections). I'd be happy to hand these across.
The aim would be for the purchaser to do the work to design and deliver the projects going forward, and I would only do what is necessary to smooth the transition (client relationship stuff).
There would be no risk to the purchaser aside from committing some extra staff resource to service the additional clients. Hence potentially a very attractive proposition for the purchaser to gain some new long term clients, perhaps is a slightly different sector that they could expand into, and clients that a bigger business could develop further than I have.
Does this sound a reasonable proposition, or might there be a better way to do this?
The business has provided a good income plus a decent pension and other investments, but now that I’m in a position to retire within a couple of years, I’d like to exit the business but also make some use of the value of the client relationships and track record we have built up. I’m 47, so probably won’t actually retire, but I do fancy a new challenge, or perhaps a lower stress role for a while, giving me some more time with family, kids, etc. I am aware that the business is essentially just me, and it has no long-term contracts past about 9 months in advance, so values would reflect this.
There are plenty of other companies small and large within our industry doing similar and we have some very juicy client names on our roster. I did try to sell the business a couple of years back but the industry was still recovering from Covid to some extent, I had quite a bit of interest but the offers I had in at the time were not what I was looking for. Potential buyers raised concerns that the business was just me, in other words I am the business. So I parked it for a bit.
So looking to go again, but might need to seek to structure the deal a little differently, based on some sort of revenue share. The aim would be for me to approach other business owners in the same sector and offer to work with them for 2-3 years to transition my clients across to them. For this there would be a fee paid to me each year based purely on the profitability of those clients and projects actually transferred. I would imagine that the fee would decrease over say 3 years, perhaps starting at 75%, decreasing in stages to say 50%, 25%, etc. After 3 years the clients are theirs. Any new clients I secure during the transition period could also be transitioned under a similar arrangement (on average I tend to pick up around 1 new client a year through my current connections). I'd be happy to hand these across.
The aim would be for the purchaser to do the work to design and deliver the projects going forward, and I would only do what is necessary to smooth the transition (client relationship stuff).
There would be no risk to the purchaser aside from committing some extra staff resource to service the additional clients. Hence potentially a very attractive proposition for the purchaser to gain some new long term clients, perhaps is a slightly different sector that they could expand into, and clients that a bigger business could develop further than I have.
Does this sound a reasonable proposition, or might there be a better way to do this?
"Potential buyers raised concerns that the business was just me, in other words I am the business. So I parked it for a bit."
Has anything changed with this? If not, you'll probably come up against the same concerns, but no harm in trying, the worst anyone can say is no.
Have you stayed in contact with any of the previous potential purchasers?
Has anything changed with this? If not, you'll probably come up against the same concerns, but no harm in trying, the worst anyone can say is no.
Have you stayed in contact with any of the previous potential purchasers?
Huevos said:
Hi all, after some advice. For the last 10 years I have run a consultancy based B2B limited company providing design and project management services (during implementation phase) of interiors for a couple of niche sectors. The business works on a project by project basis, but almost all or our customers are long term, some very loyal, issuing repeat orders (but none are tied to a retainer or longer term contract). I have some good connections within the industry and we acquire work organically rather than having to market or advertise ourselves. Annual turnover is roughly £350k, and the individual projects tend to vary between £20k and £60k. I am sole director, we have one part-time employee (my wife) in an administrative role, but other than that I rely on a tried and trusted network of specialist freelancers to support our project delivery.
The business has provided a good income plus a decent pension and other investments, but now that I m in a position to retire within a couple of years, I d like to exit the business but also make some use of the value of the client relationships and track record we have built up. I m 47, so probably won t actually retire, but I do fancy a new challenge, or perhaps a lower stress role for a while, giving me some more time with family, kids, etc. I am aware that the business is essentially just me, and it has no long-term contracts past about 9 months in advance, so values would reflect this.
There are plenty of other companies small and large within our industry doing similar and we have some very juicy client names on our roster. I did try to sell the business a couple of years back but the industry was still recovering from Covid to some extent, I had quite a bit of interest but the offers I had in at the time were not what I was looking for. Potential buyers raised concerns that the business was just me, in other words I am the business. So I parked it for a bit.
So looking to go again, but might need to seek to structure the deal a little differently, based on some sort of revenue share. The aim would be for me to approach other business owners in the same sector and offer to work with them for 2-3 years to transition my clients across to them. For this there would be a fee paid to me each year based purely on the profitability of those clients and projects actually transferred. I would imagine that the fee would decrease over say 3 years, perhaps starting at 75%, decreasing in stages to say 50%, 25%, etc. After 3 years the clients are theirs. Any new clients I secure during the transition period could also be transitioned under a similar arrangement (on average I tend to pick up around 1 new client a year through my current connections). I'd be happy to hand these across.
The aim would be for the purchaser to do the work to design and deliver the projects going forward, and I would only do what is necessary to smooth the transition (client relationship stuff).
There would be no risk to the purchaser aside from committing some extra staff resource to service the additional clients. Hence potentially a very attractive proposition for the purchaser to gain some new long term clients, perhaps is a slightly different sector that they could expand into, and clients that a bigger business could develop further than I have.
Does this sound a reasonable proposition, or might there be a better way to do this?
Do you enjoy the work? Why not just continue the business but cherry pick your customers/projects? 80/20 the business and work on the easiest/most profitable/least stressful work? Take more time out do the other things you want to do, at 47 you have a lot of time to fill still.The business has provided a good income plus a decent pension and other investments, but now that I m in a position to retire within a couple of years, I d like to exit the business but also make some use of the value of the client relationships and track record we have built up. I m 47, so probably won t actually retire, but I do fancy a new challenge, or perhaps a lower stress role for a while, giving me some more time with family, kids, etc. I am aware that the business is essentially just me, and it has no long-term contracts past about 9 months in advance, so values would reflect this.
There are plenty of other companies small and large within our industry doing similar and we have some very juicy client names on our roster. I did try to sell the business a couple of years back but the industry was still recovering from Covid to some extent, I had quite a bit of interest but the offers I had in at the time were not what I was looking for. Potential buyers raised concerns that the business was just me, in other words I am the business. So I parked it for a bit.
So looking to go again, but might need to seek to structure the deal a little differently, based on some sort of revenue share. The aim would be for me to approach other business owners in the same sector and offer to work with them for 2-3 years to transition my clients across to them. For this there would be a fee paid to me each year based purely on the profitability of those clients and projects actually transferred. I would imagine that the fee would decrease over say 3 years, perhaps starting at 75%, decreasing in stages to say 50%, 25%, etc. After 3 years the clients are theirs. Any new clients I secure during the transition period could also be transitioned under a similar arrangement (on average I tend to pick up around 1 new client a year through my current connections). I'd be happy to hand these across.
The aim would be for the purchaser to do the work to design and deliver the projects going forward, and I would only do what is necessary to smooth the transition (client relationship stuff).
There would be no risk to the purchaser aside from committing some extra staff resource to service the additional clients. Hence potentially a very attractive proposition for the purchaser to gain some new long term clients, perhaps is a slightly different sector that they could expand into, and clients that a bigger business could develop further than I have.
Does this sound a reasonable proposition, or might there be a better way to do this?
The other option is bring in a "junior" PM who takes some workload off you with the goal to take over the business in "x" number of years?
The value you want for the business versus what others think a one-man band is worth is going to differ too much I think.
Its difficult to sale a consultancy business when you are the consultant. The business is already operating by you selling your expertise. Why not just sale your expertise to the potential "buyers" and work with them.
You are in an enviable position.
I've sold a couple of businesses and I'd say yours would be tricky - not impossible, but not straightforward.
You've essentially outlined a sort of earn-out, by introducing new customers for a fee. That could work, particularly if you've clearly identified companies in your space that would benefit from your business becoming their new business.
I don't know your industry, but would one of your suppliers/partners find owning more of the decision chain (ie to become more client facing) of value?
As suggested above, I'd be tempted to let the business chug along with you cherry-picking the clients you want to work with. I retired far too early and came to realise that work (no matter how limited) is good. A man needs a mission!
You've essentially outlined a sort of earn-out, by introducing new customers for a fee. That could work, particularly if you've clearly identified companies in your space that would benefit from your business becoming their new business.
I don't know your industry, but would one of your suppliers/partners find owning more of the decision chain (ie to become more client facing) of value?
As suggested above, I'd be tempted to let the business chug along with you cherry-picking the clients you want to work with. I retired far too early and came to realise that work (no matter how limited) is good. A man needs a mission!
i had a similar issue about three years in to starting my business. That I was the business.
I took this advice and adopted systems and processes to mean that the business runs without me.
Having said that I quite like working here now so I didn't sell.
If you do sell then an option I would expect you should offer the purchaser is a two or three year earn out, transferring a percentage of your current business, with targets for your pay out.
I took this advice and adopted systems and processes to mean that the business runs without me.
Having said that I quite like working here now so I didn't sell.
If you do sell then an option I would expect you should offer the purchaser is a two or three year earn out, transferring a percentage of your current business, with targets for your pay out.
How much profit does the business generate after paying you a market rate true salary? Probably not a lot, and no one's going to pay you Day One value for it x multiple anyway.
Realistically, your best bet may be to engineer the extraction of cash at CGT rates rather than dividend rates and go from there.
Unless you want to be part of a bigger organisation and work within it, as lots of consolidation within professional services firms.
Realistically, your best bet may be to engineer the extraction of cash at CGT rates rather than dividend rates and go from there.
Unless you want to be part of a bigger organisation and work within it, as lots of consolidation within professional services firms.
JonPH said:
How much profit does the business generate after paying you a market rate true salary? Probably not a lot, and no one's going to pay you Day One value for it x multiple anyway.
Realistically, your best bet may be to engineer the extraction of cash at CGT rates rather than dividend rates and go from there.
Unless you want to be part of a bigger organisation and work within it, as lots of consolidation within professional services firms.
Yeah I'd quite fancy working as part of a bigger organisation for a bit, as at present all the responsibility stops with me. But I do want to spend more time seeing my kids grow up, and the balance isn't quite right at the moment. We make an average of 40% margin before tax across projects and I pay myself mostly in dividends, and have been whacking the maximum into company pension and personal stocks/shares ISA's for a few years now.Realistically, your best bet may be to engineer the extraction of cash at CGT rates rather than dividend rates and go from there.
Unless you want to be part of a bigger organisation and work within it, as lots of consolidation within professional services firms.
The idea of selling as a company with an X multiple of valuation is tricky and likely unrealistic for all the reasons outlined above. Hence instead offering an almost no-risk route to someone willing to take on my clients with my assistance.
What they would get is oven ready projects from loyal customers generating decent margins, and an introduction to a profitable niche sector in which they likely do not currently operate. What I would get is a source of income as the clients transition and the assistance of a bigger team to do the grunt work as things transition, meaning I get to spend more time with family and concentrating on my next venture.
southendpier said:
I took this advice and adopted systems and processes to mean that the business runs without me.
Very difficult to do in our industry unless we became a business of significant size as essentially we are selling our time and expertise. And I have the most expertise in the business and currently hold the most of the trust and relationships with our clients.NDA said:
I've sold a couple of businesses and I'd say yours would be tricky - not impossible, but not straightforward.
You've essentially outlined a sort of earn-out, by introducing new customers for a fee. That could work, particularly if you've clearly identified companies in your space that would benefit from your business becoming their new business.
I don't know your industry, but would one of your suppliers/partners find owning more of the decision chain (ie to become more client facing) of value?
As suggested above, I'd be tempted to let the business chug along with you cherry-picking the clients you want to work with. I retired far too early and came to realise that work (no matter how limited) is good. A man needs a mission!
We have identified potential purchasers who would be a good fit for us and our clients. It is quite difficult and costly these days to get new clients in our industry as so much is sewn up by procurement departments etc. That said, I've personally lost enthusiasm for what I do (can do it in my sleep) and would be keen for fresh challenges, hence another reason for wanting an out. The idea of chugging along means more of the same, without the enthusiasm of something fresh.You've essentially outlined a sort of earn-out, by introducing new customers for a fee. That could work, particularly if you've clearly identified companies in your space that would benefit from your business becoming their new business.
I don't know your industry, but would one of your suppliers/partners find owning more of the decision chain (ie to become more client facing) of value?
As suggested above, I'd be tempted to let the business chug along with you cherry-picking the clients you want to work with. I retired far too early and came to realise that work (no matter how limited) is good. A man needs a mission!
The fee for a potential purchaser (maybe purchaser is the wrong word) would only be payable once they had the projects and clients generating income. So zero risk to them as fees would be a percentage of profits on each project.
PoorCarCollector said:
"Potential buyers raised concerns that the business was just me, in other words I am the business. So I parked it for a bit."
Has anything changed with this? If not, you'll probably come up against the same concerns, but no harm in trying, the worst anyone can say is no.
Have you stayed in contact with any of the previous potential purchasers?
Yes we have stayed in contact with the previous so they would be first port of call. I am not trying to sell the business as a going concern (i.e. valued at X times EBIDTA etc), just transition the paying clients we have to another company, who will then pay me based on the profitability of each project or client that successfully transitions.Has anything changed with this? If not, you'll probably come up against the same concerns, but no harm in trying, the worst anyone can say is no.
Have you stayed in contact with any of the previous potential purchasers?
Huevos said:
We have identified potential purchasers who would be a good fit for us and our clients. It is quite difficult and costly these days to get new clients in our industry as so much is sewn up by procurement departments etc. That said, I've personally lost enthusiasm for what I do (can do it in my sleep) and would be keen for fresh challenges, hence another reason for wanting an out. The idea of chugging along means more of the same, without the enthusiasm of something fresh.
The fee for a potential purchaser (maybe purchaser is the wrong word) would only be payable once they had the projects and clients generating income. So zero risk to them as fees would be a percentage of profits on each project.
Yes, I could see this working. I was involved in a similar transaction a couple of years ago as it happens - one man company with a bunch of contracts. He was paid out on the transfer or those contracts which he handheld and guided into the new company. Similar, but not the same of course. It needs to be carefully done, but it's entirely doable. The fee for a potential purchaser (maybe purchaser is the wrong word) would only be payable once they had the projects and clients generating income. So zero risk to them as fees would be a percentage of profits on each project.
dan_87 said:
Message to the OP. I ve tried to email you but you ve disabled the option. I believe I m in the same space as you and welcome a conversation. I might be interested myself, but know a lot of other people in game whom also might be. Drop me a message!
As a new member, seems like this function is disabled for a period of time. Realistically, will be the summer before I investigate this properly as have some ongoing family commitments over the next few months, and work is generally very busy up until the middle of June. But thought no harm in getting prepped. Understand if you'd like to keep this private on here, but you mind saying what part of the industry you are in specifically?NDA said:
Yes, I could see this working. I was involved in a similar transaction a couple of years ago as it happens - one man company with a bunch of contracts. He was paid out on the transfer or those contracts which he handheld and guided into the new company. Similar, but not the same of course. It needs to be carefully done, but it's entirely doable.
Sounds good, yeah would expect to be paid only for those projects & clients that do transfer and start generating revenue. Then over a couple of years the trust and client relationship gets transferred from me to the people at the new company, with my assistance. I guess the snag is that I will want to do as little work as possible for the reasons already outlined (more time with family, time for new projects, etc), and this might be somewhat at odds with what the new company will expect, and what is needed to transfer the clients, and get the new company up to speed with things. So wondering how to navigate this to some extent?
Obviously if I was being paid something for my time (or perhaps just for the time over whatever baseline is agreed) then this would not be an issue, but if it takes me just as long to manage the transition as it would to just keep the business ticking over for a couple more years, then there would be more benefit to me just keeping things running and then simply shutting up shop, or perhaps just keeping just a couple of my favourite low-stress clients as a sideline.
Wonder how to get the balance right?
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