I'm focusing on a product and now selling my Web Dev shop. Two Dev shops are interested in buying. What price should I sell at? What other factors should I think about?
Anywhere between $80,000 to $1 million. Realistically, around $160,000 to $650,000.
I am assuming that you don't have anything exclusive and that it is a run-of-the-mill (no offense meant!) web development shop.
Some factors that will push it to the higher end:
- Great accounting and financial records
- Steady clients
- Large orders
- Exclusivity (others can't do what you do)
- Talented employees, if any, who will stay after sale
Would expect you to be able to sell for high five or low six figures, assuming you're currently fairly involved and there's no contracts, moat around clients, or special sauce in customer acquisition.
Why not hire a good manager instead? It sounds like you could pay them well, still pay yourself, and make your business more valuable if they can grow it without you in the critical path. They could also potentially contribute to the product.
So the valuation isn't based on profit/loss so much as client list, client quality, avg client annual value and repeat business etc.
With the numbers you've shared, likely we are talking 10's of clients per year, or if it is higher then they are likely low value clients, meaning your book of business isn't worth much. I mean no disrespect, just trying to be honest as I have been through this.
I'd get the interested party to put a number out that they are thinking. Give them some basic info and let them propose a value and then see how you feel. Sometimes they need the business history bad enough to pay for it. Sometimes they have a need to angle into a few clients that you have and so they'll somewhat over value the business based on their opportunity.
Obviously the more sophisticated the business the more I could be wrong. If you really want an idea without sharing any details with the potential acquirer get with a business broker and have them do a non-binding quick eval to give you a ballpark. I've done that and paid a small price for it since I wasn't going to use them most likely, but it usually is worth the small cost (relative to the size business).
It is hard to hack your way through this one if you want accurate information to maximize your valuation.
I'd also encourage the potential buyer to value the business first, with providing only some basic data points, and that way you know if there is even a real opportunity for both parties. Cause if you are thinking you are getting some multiple of revenue (or net) and they are saying the book of business is worth $50k, you could be off by an insurmountable number and better to know that earlier then later.
I generally boil my offer down to:
3 times NET Profit Plus cash in the bank Less debt Less a working capital adjustment.
I would offer around £300k for your business in a HOT and then head towards Due Diligence looking for reasons to validate that number -/+
Other offers will vary depending on buyer
We even have an app that generates our projects: https://www.youtube.com/watch?v=W79nqvCk6Q8