

Ask HN: How to sell a startup? - bakesale

A friend of mine (not me, I swear) has a profitable company that does about 3 million a year in gross revenue.  He’s at a point where the company is still growing and has a decision to face -- sell it or expand it in a way that moves him into a CEO position with a staff reporting to him.  Right now he has a just 3 or so employees, all working from home.  He doesn’t like the idea of setting up an office -- he really is a startup guy and wants to move on to another project.  So now he’s thinking of selling, and knows little about how to approach that.<p>So the main question is: How does one sell a startup?<p>I know a thing or two now about approaching angels and VCs, but little about approaching buyers.  Do VCs buy companies or know people who do?  Does one just directly contact competitors like I’ve heard?  Any tips on how to go about this are appreciated.  The guy who founded this site bootstrapped it and has no "connections" to speak of.  It’s a great feat and an inspiration to those going it alone. However, it really does leave him in the dark now that he wants an exit and I'm pretty sure this company is too big to use digitalpoint, eBay, etc. for a sale.<p>Another question: How does one value a company?<p>I know enough to know that this is an art as much as a science, especially with startups.  I’ve heard three to five times gross revenue, especially if the business is growing.  That gives a target range of 9 to 15 million.<p>I guess I hear about companies going up for sale and don’t really know if there is a process that they use to announce it or if they just put out a press release or what.<p>Notes: I’ve searched YC and found a few posts in a similar vein.  Forgive me if there is overlap, but I didn’t get all the answers I felt I needed for this particular situation (such as using digitalpoint or eBay for sales).  Also, I’m posting this under a new account while I research a sale and valuation until the owner is sure he wants to proceed with a sale.
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noodle
why only the two options? is there something intrinsic about this business
that precludes him from having his cake and eating it too?

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bakesale
You mean like cashing out some to an investor and continuing to grow? That is
a possibility, but he seems to want to be rich or be king, but not a
combination of the two. :-)

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noodle
no, i mean more like, why can't he start to structure the company so that he
doesn't have to be directly involved so much? gradually change business
processes and such so that he only has to throw in an hour or two a day,
freeing up time for other things.

it'll cost him, will mean he has to spend more money on other things (another
employee perhaps), but he'll still be making $, have direct influence on the
company, and the freedom/power to jump back into it full time if he wants.

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bakesale
Oh, yes, that's another possibility, but might not suit his personality. He
likes being involved.

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noodle
fair enough. still something worth considering, though. its not like he won't
be involved, just, not full-time.

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rms
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