Selling my business advice

lcharm

I started an online business in 2010 which I'm looking to sell.

My turnover isn't too high around £35k and the margins are very tight (~15%) although at it's peak it was turning over £7K per month but that dropped both because of the market and mostly as I neglected it due to personal issues.

The business also consists of an eBay account with 100% positive feedback and top rated seller status which not only gives added exposure but also discounts off the eBay fees so this is probably the most valuable marketing asset the business owns. It also has 2 trading websites, a merchant account (which can take up to 3 months to get approved for), another ebay account and an Amazon account

I'm now looking to get into teaching as I have a science background but not sure how to go about selling the business so here is what I've already explored

• Contacting existing larger competitors as they already stock many of my products and so will have the margins to make a decent profit
• I've contacted a broker but they are asking for upfront fees plus a minimum 5K or 7.5% in commission and 6 months exclusivity. This isn't a viable option and other brokers look at minimum 150K+ turnover businesses.
• I've checked out 2-3 of the biggest business selling websites but they charge around £120 p/m and some seem to be full of junk or 'turnkey businesses;

I was contacted by a competitor around Nov 2011 who wanted to buy the business (at that point my t/over was better) but I turned them down as I wasn;t ready and no offer was made so communication just stopped. Should I try and regain contact?

Wywth

lcharm wrote: »

I started an online business in 2010 which I'm looking to sell.

My turnover isn't too high around £35k and the margins are very tight (~15%) although at it's peak it was turning over £7K per month but that dropped both because of the market and mostly as I neglected it due to personal issues.

The business also consists of an eBay account with 100% positive feedback and top rated seller status which not only gives added exposure but also discounts off the eBay fees so this is probably the most valuable marketing asset the business owns. It also has 2 trading websites, a merchant account (which can take up to 3 months to get approved for), another ebay account and an Amazon account

I'm now looking to get into teaching as I have a science background but not sure how to go about selling the business so here is what I've already explored

• Contacting existing larger competitors as they already stock many of my products and so will have the margins to make a decent profit
• I've contacted a broker but they are asking for upfront fees plus a minimum 5K or 7.5% in commission and 6 months exclusivity. This isn't a viable option and other brokers look at minimum 150K+ turnover businesses.
• I've checked out 2-3 of the biggest business selling websites but they charge around £120 p/m and some seem to be full of junk or 'turnkey businesses;

I was contacted by a competitor around Nov 2011 who wanted to buy the business (at that point my t/over was better) but I turned them down as I wasn;t ready and no offer was made so communication just stopped. Should I try and regain contact?

If gross profit is about £5k, what is the net profit?

What are the projections going foward? You suggest the business is in decline.

I don't think anyone would pay much, if anything. What are the barriers to entry for someone that wished to start up themselves in this business area?

Perhaps the competitor wanted to buy you out to take away competion, but if they now know your business is in decline anyway, they may not be so interested.

lcharm

The market is a growing market the reality is my business is in decline as I've had personal issues to deal with which meant I couldn't manage the business effectively (i paused most of my advertising accounts and relied purely on organic traffic to my site to convert as well as ebay/amazon)

I didn't take any drawings from the business this year, i've been living off my savings and the 15% takes into account expenses

I would be selling the business on for it's marketing assets as much of the work done my sites would not only cost someone thousands of pounds but you are looking at 6-12 months of man hours to get to the level it is now. It just needs a capital injection in order ot improve margins as I was never able to buy stock at the level some suppliers wanted to improve discounts. I do however have good standing with all my suppliers and have credit agreements which in this climate aren't readily given out.

Many of my competitors turn over millions and I'm on their radar as a competitor myself plus some of them are actually my suppliers too

somethingcorporate

The barriers to entry is really the key question. I do not see a huge amount of value in your company if all it is generating is £5k NP per year.

lcharm

I fully appreciate that and that was something discussed with a broker before I turned them down. He said based on the th accounts I wouldn't get much (if anything) as you've said but based on things like an established ebay account I could have potential with people already in the market.

1 competitor in particular sells does about 20K p/m just on ebay but they have 1000s of products whereas I only have about 50 but they don't have top rated seller status. Whenever I list a new product that they already have I always appear above them on ebay 'best match' search despite the fact they sell more and it's down to the fact I've kept the account in excellent standing. If someone like that was to import their products to my account they would experience a boost in sales with little or no additional marketing expense.

My weaknesss is the margin in my exisiting products, I don't have the capital to invest in any more new products or larger quanities of existing ones. The business itself can take on any health & beauty product.

The bulk of the overheads in the business can be merged with an exisiting business.

But in answer to your question there aren't many barriers to entry except for Amazon which required approval for my account into their health category which I had to jump through a few hoops for. I was also 'interviewed' face to face by a pharmaceutical distributor before I got approved to order from them as I am not a registered pharmacist.

paulwf

Selling a business - especially one without physical assets as such - is always very difficult to price. It's worth as much as you can get for it i.e. suggest a price and negotiate from there until someone accepts it. Having said that lets try and estimate a figure.

Conventional wisdom is a business is worth around three times net annual profit. You appear to have next to no net profit based on the limited information about your gross profit. That makes it worthless using that model.

One positive you have is low cost businesses are actually easier to shift, people can buy them from savings or redundancy money instead of requiring bank loans and investors. However I just can't see the potential in selling it to an individual, even if they *doubled* turnover and even if we assumed the profit margin was net instead of gross profit it still doesn't pay a proper wage. It could potentially make some pocket money for someone semi retired and as you've done all the legwork maybe you could get a couple of thousand for it. The problem you'll have is there are so many scammers selling a "business in a box" on ebay.

Would a large company buy it? With 5 sales channels that means an average turnover per channel of £7K i.e. £1K gross profit. If a large company already has these channels in place adding duplication with yours is adding a lot of complexity for very little return.

I just can't really see much return. As you say a competitor turns over £20K a month, with such tight margins online that sort of volume is required to make a sensible net profit.

lcharm

Thank you.

I think they may as they buy in larger quantities than I do (which I know because I have a good relationship with a supplier who suppliers to them!) and I know they spend much more than I do which I why I don't get the volume discounts.

I also know they rely on selling volume quantitites so my margin is reflectied on what I pay for stock rather than what they pay for stock they are already using.

I don't think it's suitable for an individual private investor but for someone maybe turning over 100-200K with products I already stock and who have their own margins it could be a sudden boost of 30K revenue.

Like you said it's down to the buyers valuation and not mine!

Savvy_Sue

Can a competitor actually take over your ebay account and direct their business through it? I wasn't sure that was allowed ...

CKhalvashi

somethingcorporate wrote: »

The barriers to entry is really the key question. I do not see a huge amount of value in your company if all it is generating is £5k NP per year.

I've always looked at pricing a business at 'Assets + 1 year profit = ...', although it's not always simple as this. I have been known to go higher in the past, if the business in question is one that can be realistically expanded with reasonable risk and cost.

There's no scientific measure to it.

CK

lcharm

Savvy_Sue wrote: »

Can a competitor actually take over your ebay account and direct their business through it? I wasn't sure that was allowed ...

I wasn't sure at first but apparently this sort of thing is common where competitors take over businesses to increases market share. As long as they don't become a monopoly (which is unlikely) then it's generally fine.

Mistral001

What about just renting it to them with an option to buy at the end of say a year?

That way they would not be taking much risk at the minute, but if they saw that sales through your site were being profitable they could then decide to buy it.

Perhaps would need a commercial lawyer to set up the contract with option etc.