Advice on selling sole trader business

retireearly

We are looking to sell my husbands business to retire. He is a sole trader repairing electrical items such as washing machines and ovens and has been running the business for 12 years. He has over 60% repeat business and has private and public sector clients. It is really a lifestyle business as he only works mornings as he has an occupational pension. Any accountants out there can give any advice on what he may be able to sell the business for? He works from home. Turnover is around £27,000 a year so not mega bucks with around £4,000 in parts. It would be good to get something for it after all his hard work getting and keeping clients over the years rather than just walking away. Any advice would be really appreciated! We are based in North Wales.:)

00ec25

as a sole trader it is unlikely he has a balance sheet but in overly simple terms there are 2 ways to value a business:
- what it owns: ie the value per the balance sheet: so total assets less what it owes
or
- some sort of multiple of its turnover (or profit) per the tax return

the more complex, more correct ,and what you actually want value, is the inclusion of a "goodwill" factor - that is not something you can get via a few lines on a forum. You'd need to pay an accountant to do it for you

soolin

retireearly wrote: »

We are looking to sell my husbands business to retire. He is a sole trader repairing electrical items such as washing machines and ovens and has been running the business for 12 years. He has over 60% repeat business and has private and public sector clients. It is really a lifestyle business as he only works mornings as he has an occupational pension. Any accountants out there can give any advice on what he may be able to sell the business for? He works from home. Turnover is around £27,000 a year so not mega bucks with around £4,000 in parts. It would be good to get something for it after all his hard work getting and keeping clients over the years rather than just walking away. Any advice would be really appreciated! We are based in North Wales.:)

As per the previous response you really need to speak to an accountant. You aren't really selling a business unless you have a lot of money invested in tools and parts- you seem to be suggesting you are selling 'goodwill' ie, a customer base. It might well be worth checking what you can actually do with that data base under the new GDPR before you hand over a client list to another person. With so low a turnover it might well not be even viable to spend money on trying to recoup anything - but as has been said, that is perhaps something that an accountant could help you with.

lincroft1710

The "value" of such a business is actually in the skill and ability of the person doing the job, which of course is not being sold. So it comes down to tools (which probably aren't worth much secondhand) and the client list. So you will either need to find someone wanting to be their own boss and hopefully be skilled in electrical repairs or sell the list to an existing "rival".

If I was one of your public sector clients, I might not want to continue to use your "business" if you were no longer the repair person.

Pennywise

Realistically, he's not going to get much money for it. He may well get the same, or more, by carrying on operating for another year or two, especially if it's a "hobby" business that he can operate part time.

The thing is that the buyer needs to be a similar person with similar skills/experience, and someone like that probably already has their own self employed business doing the same thing. It's not something any random person could learn on the job within a short time frame.

You "may" be lucky and find someone local who's had years of experience working for someone else and wanting their own business, so it may be worth a punt to put it up for sale, but with agents fees, solicitors fees, etc., he'll probably not come out with much.

Finally, if you do decide to put it on the market, be VERY wary of the national business sales agents - they're well known for giving unrealistically high valuations, promising they have buyers just waiting for your business, charge you a few thousand up front for marketing costs, and then nothing happens!

Savvy_Sue

This is just a suggestion, prompted by the comments above about the value being the person doing the repairs, and it may not be a good one, but here goes.

If he knows someone who might be interested, then is it worth going into a partnership for a couple of years with the expectation that he'll be 'bought out' at some point?

But he will need a partnership agreement, carefully worded and each party having it checked by their own solicitor.

and the partner needs to be as skilled and 'good at the job' as he is, or someone who can be trained up to be as good in a short space of time. Both of which could be a big ask.

Mistral001

Savvy_Sue wrote: »

This is just a suggestion, prompted by the comments above about the value being the person doing the repairs, and it may not be a good one, but here goes.

If he knows someone who might be interested, then is it worth going into a partnership for a couple of years with the expectation that he'll be 'bought out' at some point?

But he will need a partnership agreement, carefully worded and each party having it checked by their own solicitor.

and the partner needs to be as skilled and 'good at the job' as he is, or someone who can be trained up to be as good in a short space of time. Both of which could be a big ask.

This is a very good suggestion.

As others have said the business's worth is mostly the owner's skill and experience which goes when the business goes. However the public sector clients could be worth quite a bit to someone else as such clients for one-man businesses are very difficult to get.

BTW I see this as more than a hobby business, as it has a very reasonable turnover with low expenses for someone only working mornings.

Pennywise

Savvy_Sue wrote: »

If he knows someone who might be interested, then is it worth going into a partnership for a couple of years with the expectation that he'll be 'bought out' at some point?

Trouble is, it's not making enough profit to pay for two peoples' wages. Neither is likely to want to work for free during that 1/2 year period. And if they split the profits, the seller is going to want the resulting sale to be worthwhile giving up half their wages for that time, which is unlikely given the business is probably only worth £10k or so anyway. The seller would be just as well to continue on his own for 2 years, keep all the profit, and then just give up - he'd be no worse off!

Mistral001

Pennywise wrote: »

Trouble is, it's not making enough profit to pay for two peoples' wages. Neither is likely to want to work for free during that 1/2 year period. And if they split the profits, the seller is going to want the resulting sale to be worthwhile giving up half their wages for that time, which is unlikely given the business is probably only worth £10k or so anyway. The seller would be just as well to continue on his own for 2 years, keep all the profit, and then just give up - he'd be no worse off!

The partner would have to put something in right from start and be looking to grow the business. There would also need to be a cast-iron deed of partnership drawn up.

I accept that many buyers would probably consider taking on an existing owner as just baggage but others could see advantages of tapping into the experience and contacts that the present owner has.

Many professionals such as architects and accountants when retiring will stay on as part time consultants, so it is not an unusual set-up.

Pennywise

Mistral001 wrote: »

Many professionals such as architects and accountants when retiring will stay on as part time consultants, so it is not an unusual set-up.

Yes, I know, I'm an accountant, but the outgoing seller usually wants to be paid for the time spent as a consultant, so you're back to two people sharing the "profits".

It "can" work in certain circumstances, but you need to find the right person at the right time. It's very common in professional practices and there are lots of, say accountants or solicitors, around to do it. But far fewer domestic appliance repairers, so finding the right fit is the difficult bit.

The OP needs to be thinking about directly contacting people they believe may be interested, i.e. other established appliance repairers looking to expand or established handymen who are looking to upskill themselves.

soolin

Mistral001 wrote: »

This is a very good suggestion.

As others have said the business's worth is mostly the owner's skill and experience which goes when the business goes. However the public sector clients could be worth quite a bit to someone else as such clients for one-man businesses are very difficult to get.

BTW I see this as more than a hobby business, as it has a very reasonable turnover with low expenses for someone only working mornings.

I'm not sure that 27K is a reasonable turnover and there is no indication given as to costs and profit?