Ask HN: How much should I sell my Web Dev shop for?

https://news.ycombinator.com/item?id=26558651

by bbertucc • 5 years ago

13 11 5 years ago

news.ycombinator.com

$325k '20 income w/ $80k profit, $222k '19 income w/ $66k profit ... solid buildout workflow (2 wks buildout for most sites).

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?

davismwfl2• 5 years ago

Selling a consulting or web dev type business is different then selling a product based business. With some rare exceptions when you are selling a web dev business you are selling your client list, current and future planned work etc. With that, many times comes a set of developers that work for the business etc, but the primary payment is for the "book of business".

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).

bbertucc4• 5 years ago

cool. how does a business broker value a company? i default to transparency, so would just hack it myself if possible.

davismwfl2• 5 years ago

Similar to real-estate to a certain degree. A lot of it is based upon prior experience and having sold like businesses usually. Many also belong to trade groups or similar organizations that provide deal information that they can look up anonymized deals and find like values etc.

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.

1123581321• 5 years ago

You're essentially selling a job right now, unless you're completely removed from operations and new business development, but it sounds like you aren't. It would also depend on how well you retain your clients and how profitably your new customer acquisition will run without you (the degree to which your personal network pulls business.)

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.

bbertucc4• 5 years ago

Ya. Totally. The good manager is my Plan B if I don't get an offer I want. We have loyal clients that most companies are hot for + a great workflow, so hopefully that translates into more than just a job..

mapster• 5 years ago

How solid is your workflow and sales funnel?

bbertucc4• 5 years ago

Super solid. We have a workflow that allows devs or designers with under 3 yrs of experience to develop sites that usually require pros with > 5 yrs. That means lower overhead of us and stronger profit.

We even have an app that generates our projects: https://www.youtube.com/watch?v=W79nqvCk6Q8

pdevr• 5 years ago

I see no actual prices posted by anyone, so here is something to use as a starting point:

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

I posted this just so you have something to start with. You know your situation better than me or anyone else.

bbertucc4• 5 years ago

Amazing. Thank you.

kristianp• 5 years ago

Have a read of "Built to Sell". I have no experience in this area, but found that book eye opening. One example: expect to have to work for the buyer for at least a year as part of the contract of sale, part of the payment is vested.

ruskibeats• 5 years ago

I spend a lot of time reviewing accounts of small businesses with the view of buying them.

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

Ask HN: How much should I sell my Web Dev shop for?

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