I'm Ready Right Now!

[Stillwaiting]

I'm 42 and started a businesss about 4 years ago that produced 2.8m in gross sales thus far and as soon as I find a buyer you can reach me at my cabin, on the lake, with a fishing pole in hand. The only problem right now is trying finding a buyer... I've thrown the offer in front of many investors but they dont even bite and I dont understand why.. Its a product based business where I created my own brand of products, supply many chain stores and the company still has an enormous amount of growth potential and I cant even get a response from them.. Grrrrrr

SW

[jclarksnakes]

SW,
...Welcome to the forum. Is that 2.8 million in total sales over the four years? If so and profit is 5% and you need to work full time at the business then someone may be looking at buying your business as just an opportunity to buy themselves into a low paying job. On the other hand if that is 2.8 million in sales PER year and profit is 5% or more then it might be a SWEET deal for someone to buy your business. We need more details? Unless you would really rather just talk about fishing at the lake on the cabin. Which could be a pretty good topic of discussion in the life after fire section of the forum.
Jeff

[CaseInPoint]

Quote:

Originally Posted by Stillwaiting I'm 42 and started a businesss about 4 years ago that produced 2.8m in gross sales thus far and as soon as I find a buyer you can reach me at my cabin, on the lake, with a fishing pole in hand. The only problem right now is trying finding a buyer... I've thrown the offer in front of many investors but they dont even bite and I dont understand why.. Its a product based business where I created my own brand of products, supply many chain stores and the company still has an enormous amount of growth potential and I cant even get a response from them.. Grrrrrr SW

I also own a multimillion dollar business, and am at the very last stages of selling it, OR... having the deal blow up.

Unfortunately, there are certain realities that may be surprising to some people:

A business that produces revenue of under $5M, is very difficult to sell. It's not within the range that can justify a broker's fee, so you're on your own. For an acquirer, it doesn't increase their revenue significantly, and doesn't put them in a different category size business. It also represents a very small business that is very risky for many reasons.

Also, in terms of valuation, at that level, it will be set at 1.5-4x EBITDA. In a product-based business, that might only be 5-8% of revenue on average. In other words, not very much money.

I'm really sorry to tell you things you probably don't want to hear. After all, you've achieved a lot with your business and invested much time and effort. But when putting a business up for sale, it's judged in very absolute terms.

What to do?

Keep on running your business and grow it. Add more salespeople, watch your margins, and grow it past the $5M mark. If you can get into the $10M range, even better. At that point, a broker will have incentive to shop your business around, and can even arrange for financing for the buyer.

Meanwhile, though, you're the master of your own destiny. You don't need to report to anyone and, hopefully, you're making more money than in a typical job. Enjoy it!

[Stillwaiting]

Quote:

Originally Posted by CaseInPoint I also own a multimillion dollar business, and am at the very last stages of selling it, OR... having the deal blow up. Unfortunately, there are certain realities that may be surprising to some people: A business that produces revenue of under $5M, is very difficult to sell. It's not within the range that can justify a broker's fee, so you're on your own. For an acquirer, it doesn't increase their revenue significantly, and doesn't put them in a different category size business. It also represents a very small business that is very risky for many reasons. Also, in terms of valuation, at that level, it will be set at 1.5-4x EBITDA. In a product-based business, that might only be 5-8% of revenue on average. In other words, not very much money. I'm really sorry to tell you things you probably don't want to hear. After all, you've achieved a lot with your business and invested much time and effort. But when putting a business up for sale, it's judged in very absolute terms. What to do? Keep on running your business and grow it. Add more salespeople, watch your margins, and grow it past the $5M mark. If you can get into the $10M range, even better. At that point, a broker will have incentive to shop your business around, and can even arrange for financing for the buyer. Meanwhile, though, you're the master of your own destiny. You don't need to report to anyone and, hopefully, you're making more money than in a typical job. Enjoy it!

WOW very good info, thank you!
Your right on all acount, including a broker, which I have already looked into but cant justify the associated fees as you mentioned.. We approached a few large investment groups and your right, unless it over $10M they don't even want to look at it.. I have the asking price at 6x times the EBITDA due to the enormous amount of growth potential.. I'm new when it comes to selling a business.

By the way, that is $2.8m for the 4 years combined but we should hit $1m in sales this year.. We spent roughly $1.2M on products to achieve the $2.8M in sales so as you can see margins are good not to mention the enormous amount of growth potential..

I have just wore myself out on this business working ungodly amount of hours to get it to this stage and want/need to spend more time with my family now. I am such a workaholic I don't know if I can learn how to relax again but I'm willing to try.

Jeff,
Net profits off the $2.8M for 4 years are 28% and that doesnt even include the expenses that bought us alot of good things that are business related- (wink)

SW

[ProspectiveBum]

Quote:

Originally Posted by Stillwaiting Jeff, Net profits off the $2.8M for 4 years are 28% and that doesnt even include the expenses that bought us alot of good things that are business related- (wink) SW

Do you draw a salary, or are the profits your salary? If you currently draw a salary, could you hire someone to take over the day-to-day duties of running the business, declare yourself the sole stockholder and live off the profits of the business? If you hired well, that seems like it could be a good bridge for a few years until the business grows enough to be more saleable...

[Stillwaiting]

Quote:

Originally Posted by ProspectiveBum Do you draw a salary, or are the profits your salary? If you currently draw a salary, could you hire someone to take over the day-to-day duties of running the business, declare yourself the sole stockholder and live off the profits of the business? If you hired well, that seems like it could be a good bridge for a few years until the business grows enough to be more saleable...

My salary is year end profits, I dont draw a paycheck... We run the business out of our home and use the garage as our warehouse so there is no way I could hire help.. The only way would be to rent a commercial building and then hire people but thats not the route I want to take.

SW

[ladelfina]

On the plus side of ProspectiveBum's idea, though.. commercial rents should be low and getting lower depending on where you are.. sounds like you don't need much space and wouldn't it be easier to sell a business with a setup outside your home that came with room for expansion (say you rent 150% or more of your current space requirements to allow for growth)? That takes one issue off a potential buyer's mind.. they wouldn't have to be responsible for setting up the joint, whereas now they would be, unless you are imagining the buyer is going to live in your spare bedroom and continue out of your garage which I strongly doubt . Same thing with employees; I'd imagine it's an employer's market.

Another thread on the forum mentioned Virtual Assistants, and while you may not want to outsource your scheduling, customer service or bookkeeping to Bangalore.. what I would do is closely examine a breakdown of what you are doing now day-to-day and see where contract employees could fit in and take many of the current tasks off your shoulders. I ran a small business and the once-a-week bookkeeper we hired was invaluable even though we didn't always see eye-to-eye. She even took on the annoying tasks of disputing cc or phone co. screwups, in addition to dealing with late-paying clients.. she was a pitbull with that stuff, and a godsend! We were paying her to hang on the phone and, while at the outset that seemed crazy, it meant we could do the productive stuff billed at 5x what we were paying her, with the extra bonus that with clients and suppliers it also created a dispassionate professional interface for billing matters. If you don't have an administrative structure other than you/your family, that could be another slight hurdle to selling; a prospective buyer might like the opportunity for continuity: working with those you sub out tasks to, at least over the ownership transition.

We also moved from home-based to a rented space and found two benefits: one is being able to CLOSE THE DOOR, lock up, and walk away from the job, not being tempted in the least to check e-mail or messages until the next am. The second benefit was being taken more seriously, not just by clients (though that's not an issue with products so much), but by suppliers and by the community at large. Word travels (even via delivery people and so forth) that you seem to be a growing, going concern, and you never know what positive impact that impression might have (though you can't really measure it).

Our profits were nowhere near the size of yours, yet I would do the renting/hiring thing again in a heartbeat. It sounds like simply *more* to take on, but believe me it will make your life easier once you get it in place, and you can start taking 3-, then 4-, then 5-day long weekends to go fishin'...

I think a big reason the biz is overwhelming you now is that you are literally, physically, swimming drowning in it. Use those hefty profits to first buy back your personal and family space, and take it from there.

[jclarksnakes]

I got no idea what your business is but what is to keep someone from looking at your business (pretending to be interested in buying it) and then going out and setting up the exact same business without paying you a penny?
Jeff, Master of the runon sentence.

[ziggy29]

I'm ready right now, too. It's just a shame that my portfolio's not.

[Marquette]

Quote:

Originally Posted by jclarksnakes I got no idea what your business is but what is to keep someone from looking at your business (pretending to be interested in buying it) and then going out and setting up the exact same business without paying you a penny? Jeff, Master of the runon sentence.

I was thinking along the same lines... sort of. Now, keep in mind that I'm not a small-business owner nor have I ever financed one. But, if I were a buyer, I think I'd discount my interest in the company if the product wasn't patented or if someone could come up with a competing version that could possibly get around the patent.

Otherwise, I think a lot of very excellent advice has been thrown out there. Spend a little bit more to get some workspace if it'll let you bring in someone part-time to help. Look at a virtual assistant if you keep it in-house just to help with the mundane stuff like email or sending invoices.