
Ask HN: Selling my profitable side business. Interest/Advice? - pearkes
Hi HN! Posting this for a friend to keep his identity private. He'll respond through my account, and wrote all the text below:<p>Hello HN! For 5 years, I've ran a highly profitable side business. While the business requires very minimal maintenance, I'd like to focus my attention on other ventures. The site continues to provide a fantastic income, but the obligation to maintain it still exists in my head, and I'm ready to release myself of that obligation. I've never sold a business and I've been a longtime HN user and contributor, so I'm hoping that the community here can provide me with advice or even a buyer.<p>This sale represents a huge learning opportunity plus some financial security. By purchasing this business, you'll gain access to a production-quality website that has been profitable for half a decade. You'll gain the foundation to massively grow this into a much larger business, and you'll already have a customer base that loves and believes in the product. So whether you're an experienced entrepreneur looking for something new, a new entrepreneur looking to have a solid start, or just someone looking for some fantastic side income, this post should interest you.<p>Below are the financials, maintenance, and tech information about the business. I'm going to keep the product itself private except to interested buyers.<p># The Numbers<p>Users: 5522<p>Revenue (last 12 months): $76,201<p>Expenses (last 12 months): $2,521<p>Maintenance:<p><pre><code>  * During peak periods, there are ~2 support emails sent per day.
  * Technical maintenance is sometimes required, average 4 to 8 hours per business quarter.
</code></pre>
Technology:<p><pre><code>  * Python
  * Tornado
  * PostgreSQL
  * AWS for hosting
  * Twilio
  * PayPal
</code></pre>
Thanks! If you're seriously interested, please email me at hnbusinessinterest@gmail.com and I can give a more detailed rundown of the entire product, revenue numbers, etc.
======
ChuckMcM
So say more about this : "I'd like to focus my attention on other ventures."

2 emails a day? 4-8 hrs of ops work per quarter? That is a pretty trivial
amount of 'distraction' (compared to say raising a child while working).

So this is where I get lost, if this is true it would be trivial to actually
hire someone to be your email responder (they can be anywhere, so someone with
a detailed FAQ and a solid command of the English language (or what ever is
the primary language of your users) could do this for maybe $7500/year. (that
is paying them $20 for each email they answer) And a contract sysadmin, say
with an open contract at $150/hr that 8hrs per quarter is another $4,800/yr so
call it $12,500 in 'additional expenses' taking that from your revenue nets
you on the order of $60K / yr still rolling into your bank account and you
have 99% of your time to work on other stuff. (you'll still have to 'watch'
things but you don't have to 'do' things). I'd love to know _why_ you are
selling it.

That said, one way to price this is to consider what the expected rate of
return is. So given our $60K/year revenue you could invest $180,000 have it
make zero interest and withdraw it at $60,000 a year and in 3 years you would
be out of money. Personally, I'd consider anything over $180K to be too much
to pay for this business. But the assumption is that I am only confident that
the business will run reliably under new ownership for 3 years. On a regular
investment instrument I'd want to know what the final value was (at the end of
the term) and a pessimist will assume zero and an optimist with assume they
can re-sell the business for what they paid for it. If you are an optimist you
might ask "how much can I invest, at what rate, to give me a net $60K/yr
return?" Well at 5% simple interest that is $1.2M. Since we're not counting
taxes in our 60K number we'll assume that both returns can be 'income' grade
(which is to say taxed as regular income). If you can show that the business
has a 20 year lifetime then something along those lines would inform a higher
valuation.

So my advice to you on pricing a business is to ask this simple question,
"What other choices does someone have which can get them this return at a
comparable risk over this time frame? And at the end of the term how much
value is 'left'?" That is the key to understanding what is a 'good' price vs
an 'unreasonable' price for a business.

~~~
pearkes
> So say more about this : "I'd like to focus my attention on other ventures."

Yes, maintaining this on my own is trivially easy. Then you went on to
describe hiring people, managing contracts, etc. etc. That is exactly what I
_dont_ want to deal with. This isn't about money, this is about having short
term capital to focus on something I'm truly passionate about (not this side
business).

The fact is, while I still own this business, I'm still responsible for
support and maintenance. It is trivially easy, but I don't want to do it.

For very interested parties, I'm making it very clear what the business is and
doing my best to prove to them this is no scam, there is no "catch." I just
want to work on my passion.

> So my advice to you on pricing a business is to ask this simple question,
> "What other choices does someone have which can get them this return at a
> comparable risk over this time frame? And at the end of the term how much
> value is 'left'?" That is the key to understanding what is a 'good' price vs
> an 'unreasonable' price for a business.

If they did nothing to this business, I'm confident it would continue to churn
out the revenue it has been. That being said, I have many ideas to grow this
business further, and I've been sharing them with interested parties.

Also, I'm only looking for a buyout of about 1 year of revenue, not 3x.
Simple.

------
SkyMarshal
This isn't asking for advice, it's pitching a sale.

Title is misleading, and the cynic in me suspects that is intentional.

PS - nothing against selling businesses on HN, just don't hack our collective
desire to read advice on selling businesses to get your submission to the
front page.

PPS - a suggestion for an alternative: "Selling profitable business, first
time, first dibs to HN for your advice". That offers value for value, is
straight up about your intent, and would probably still get it to the front
page.

~~~
pearkes
I've gotten very good advice in this thread. It is also a pitch, because HN is
a good community for this sort of thing. I'm sorry the title mislead you.

Edit: I changed the title to better reflect the intent. Thanks for the
feedback.

~~~
SkyMarshal
Thanks, when I posted there was no advice in the comments, just inquiries
related to buying it. Upvoted, good luck!

------
rscott
You can use Flippa.com for this sort of a sale.

------
tocomment
I'd also be curious to hear advice for potential buyers? What are good
questions to ask? How can you tell how stable the business is, etc.

I've thought of buying sites on Flippa before but I always get worried they're
scams.

~~~
gacba
Since you asked, I can point you to a website I run that answers that exact
question: <http://howtobuyawebsite.org>

I wrote an ebook on that very topic to help answer those particular fears and
concerns for first-time or new buyers.

~~~
tocomment
Some feedback for you.

It's not obvious how to buy the book. There's no link on the first screen to
buy the book except the menu bar at the top. And the "buy the book" menu item
is already highlighted which made me think I was already on that screen.

------
1337biz
It would be helpful if you could at least hint what kind of business we are
talking about. The low maintenance/development/support could even hint at a
physical product, i.e. that we are in the worst case just talking about some
drop shipping business.

Of course I can understand that you don't want to have a bunch of copycat
sites popping up, but since this is a public forum it would be great if you
could at least give some rough ideas, e.g. if you are in the SaaS category.

~~~
pearkes
The service is completely web based and automatic. It requires no human
intervention except in the case that technical maintenance is required. i.e.
no shipping any products.

The service DOES depend on web scraping, and this is what causes the technical
maintenance from time to time. (And no, it is not scraping Craigslist, haha.)

Building copycat sites would be... hard. The market is niche and the
integration is not easy.

I provide SaaS to the academic market.

~~~
desas
Does it scrape university pages and is it to do with course scheduling?

~~~
markyc
i think you're getting warm :D

------
wtracy
Is there any reason you're not naming the business in your ad?

While I'm writing, could I convince you to share some sort of post-mortem
afterwards? I've off an on thought about doing what you're trying right now,
and I love to hear what did or didn't work for you.

~~~
pearkes
The reason is mostly because the business makes a surprising amount of money
for what it does. In general when I ask friends/family how much they think it
makes, they say, "I don't know, a few thousand per year." And these are people
IN the tech industry. I'd like to keep the much more profitable truth a bit
quiet, except from interested parties.

I'd consider doing a post-mortem if the buyer would allow it. If not, I can
always do an anonymous one.

~~~
blacksmythe

      >> If not, I can always do an anonymous one.
    

It is not fair to the buyer to give out any info after the sale that you
wouldn't be willing to give out before the sale.

~~~
pearkes
Of course not, I would never do anything to jeopardize that. I'd only post if
I could do so in a way that both parties approved.

------
kaa2102
You could go to an accounting firm that specializes in valuation for tech
businesses. They could help value the business and leverage their network to
find potential buyers.

------
dggrjx
What is your ratio of repeat to first-time customers? What's your customer
lifetime value?

~~~
pearkes
I serve university students. They stick around for an average of 4 years (no
surprise there). They're mostly repeat customers, but of course I get a surge
of freshmen every year. I love freshmen!

------
Khao
I could take it off your hands but I don't have any money to actually buy it.
What if you keep 80% of the income and I take only 20% and all the expenses?
Seems like a good deal, no hassle and you keep income for years to come!

~~~
TamDenholm
Pretty sure everyone here would be willing to offer those terms.

------
codegeek
Does this site make money by charging users OR is it ad based ?

~~~
pearkes
Charges users. No ads.

------
sharemywin
Use <http://www.bizbuysell.com/> or one of the other business sales sites. or
hire a business broker.

------
nilsbunger
Can you say what kind of users you serve, and whether your revenue derives
from ads or freemium or other paid offering?

~~~
pearkes
I serve students in universities. The product cost they purchase is low
(average product cost is less than $10), so they can afford it.

I sell actual services. No ads. No freemium.

~~~
codegeek
Is this a fixed sale per user per month (like a SAAS) or a user buys things
with variance dependong on what they specifically needed to buy ? I am asking
because you have 5500+ users with 76K revenue. Simple math says you make less
than 2 dollars per user per month. So I am guessing it is more like one user
buys stuff for 20 dollars while 20 other users did not do anything in a single
month ?

~~~
pearkes
They buy a set product that is around $5 to $10 on average. They purchase this
typically every quarter. It is not automatically recurring.

~~~
DLarsen
Now we know what the business is.

~~~
codegeek
tell us please

------
thebigkick
Is there a physical inventory involved?

~~~
pearkes
Nope.

------
jawns
Is there anything ... er ... morally questionable about the business? Like,
fake term papers, etc.?

~~~
pearkes
NO!

------
brador
Are you allowed to say the traffic ratio Google vs paid ads? Is it heavily
dependent on search?

~~~
pearkes
No ads have ever been purchased. All traffic is from word of mouth, believe it
or not.

------
joefarish
This wouldn't be <http://kiip.me/> would it?

------
danso
Wow, that's a nice margin. So...obvious question: adult business?

~~~
pearkes
Not an adult business. :)

------
paulhauggis
Are you paying for any marketing? If so, what kind of marketing are you doing?

~~~
pearkes
No marketing.

~~~
paulhauggis
How did you get your customers?

