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Unread 16th February 2011, 04:54 PM   #1
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Default How Much Should I Sell A $6Million Annual Revenue Company?

I was seeing that companies get sold every here an there either they get acquired or sold to a different owner etc.

My question is how much do they sell for an how do you determine the cost Say a software company is a turn key business making 6million annually profit is say 5.5 million what do you ask when you sell?
(Average not exact of course estimate)

On the other hand a clothing company brand etc say is doing $6 million annually an profits about $3 million take home money what would be the asking price in this


Software $6 million revenue annually profit $5.5million
(500k in expenses etc)


Clothing $6 million Annual Revenue Profit $3million
(3 million in expenses etc)


What would you sell for an why ?

Thanks

-Scoopy
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Unread 16th February 2011, 05:53 PM   #2
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

Does not matter what the business, it is always a multiple of net profits and ability to continue making them
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Unread 16th February 2011, 05:59 PM   #3
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

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Originally Posted by rkcc4 View Post
Does not matter what the business, it is always a multiple of net profits and ability to continue making them
Not accurate at all. I've built, bought, and sold many web-based businesses in the millions. I can say without all reserve that the most important thing when selling a web-based is to understand that the value exists only to the potential buyer.

Your best bet is always to understand a buyer's business and how your asset can improve their business model. Understand their business model, their objectives, their goals, and then see if you can leverage your asset to fulfill their business objectives.

The better you can understand a potential buyer, the better you can understand your asset under their ownership, and the better you can understand the value you bring.

The ability to understand foreign business models and draw correlations is very difficult. This is why there is a business segment specifically around assisting web-based entities with selling their assets. The value these types of understandings can bring is what makes a $100k site worth millions.

If you have a large software-based company, I can help you with that as it is my market. Clothing, however, I cannot.

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Unread 16th February 2011, 06:09 PM   #4
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

Quote:
Originally Posted by Ti View Post
Your best bet is always to understand a buyer's business and how your asset can improve their business model. Understand their business model, their objectives, their goals, and then see if you can leverage your asset to fulfill their business objectives.

The better you can understand a potential buyer, the better you can understand your asset under their ownership, and the better you can understand the value you bring.
That's exactly right. Multiples of earnings/profits is, at best, just a crude assessment of the value, IMO.

Of course, if the potential buyer is AOL, don't forget to multiply your price by ten.


Frank



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Unread 16th February 2011, 07:07 PM   #5
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

So Even If A Clothing Company is bringing in 6 million and 3 million in profit annually if it has a good brand, List Building, SEO, Social Media an Solid Customer Base It can be worth 5-7 times of its profits or revenue?

-EA
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Unread 17th February 2011, 01:18 AM   #6
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

Any more input on my last question about selling a clothing company with well brand list building, social media, seo etc.

If it was doing revenue $6 million an profit $3 million annually how much can it sell for 3 times its revenue or profit or what?

3, 4, 5 times its what..? Revenue or profit..?

-Scoopy
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Unread 17th February 2011, 03:33 AM   #7
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

but why would someone sell a business that is actually profiting? it would be my first question if i was offered a business.. why?
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Unread 17th February 2011, 03:37 AM   #8
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

Sometimes you want out explore other avenues or move into a different niche.
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Unread 17th February 2011, 03:51 AM   #9
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

Sure, there can be numbers of reason for selling. But when you announce your business for sale it certainly devalues it a bit.

It would be good to figure out something to prompt your competitors to buy your business. Make them do an offer for you first. In this case, you can increase your price 5-7 fold. It all depends on your negotiation skills.

Good luck!
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Unread 17th February 2011, 07:54 AM   #10
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

rubbish!!!

if it is in ahot/newish industry with many years of great grwoth ahead it's going to sell a lot higher than an old worn out, dying industry for sure!

Quote:
Does not matter what the business,
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Unread 17th February 2011, 07:57 AM   #11
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

hmmm...I rarely believe this excuse..i guess it happens from time to time but my guess most of the time they are bailing for a reason...


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Unread 17th February 2011, 09:00 AM   #12
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

Quote:
Originally Posted by Ti View Post
I can say without all reserve that the most important thing when selling a web-based is to understand that the value exists only to the potential buyer.

The value these types of understandings can bring is what makes a $100k site worth millions.
Exactly, and it doesn't necessarily mean that only for bigger sales. The same thing can be done with a thousand dollar site to make 20X the amount.

Quote:
Originally Posted by scoopy View Post
So Even If A Clothing Company is bringing in 6 million and 3 million in profit annually if it has a good brand, List Building, SEO, Social Media an Solid Customer Base It can be worth 5-7 times of its profits or revenue?

-EA
Well yeah... take the profit, which would be 3 mill for clothing, and multiply by 4 or 5. You have about 15 million and that could be a selling price. If it has good list building and SEO then it SHOULD be getting more profits. There will always be an increase.

Quote:
Originally Posted by bestrendz View Post
but why would someone sell a business that is actually profiting? it would be my first question if i was offered a business.. why?
It happens all the time. Sometimes people are busy, want to focus on family, want to start on a new endeavor. I get it. But I also understand the hesitation from people when they see things like this. When you buy a business, don't expect to succeed just because the current owner is. IF you buy a business, you better have a damn good plan in place to make money!

Quote:
Originally Posted by sloanjim View Post
hmmm...I rarely believe this excuse..i guess it happens from time to time but my guess most of the time they are bailing for a reason...
It happens, there could be many personal reasons as well. Not everything is truly a business decision. Sometimes people want more family time, or maybe they are grieving and don't want to deal with their business while in the process. Or maybe they just flat out don't believe they will continue making money! Someone else might believe it is a gold mine, so why not sell?

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Unread 18th February 2011, 03:05 AM   #13
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Default Re: How Much Should I Sell A $6Million Annual Revenue Company?

Quote:
Originally Posted by Frank Donovan View Post
That's exactly right. Multiples of earnings/profits is, at best, just a crude assessment of the value, IMO.

Of course, if the potential buyer is AOL, don't forget to multiply your price by ten.

Frank
For serious investors the profits are the main factor, perhaps if you can persuade someone of future value then you may be able to make a case for more, but this kind of thinking is what lead to bubble bursting.

Obviously some assets have a future value, I own some land that is currently worth probably 10k an acre, I have an offer from Walmart for $25m, so that creates a POTENTIAL value. The offer has some conditions, so the value is really based on how able are we to achieve those conditions.

In web businesses people always point to someone else in the market and say "we could be that big" but if there is ONE overused word it is COULD.

In the end, the value of something is what someone will pay at the time you must sell.
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