Ask HN: Selling my profitable side business. Interest/Advice?
Hi HN! Posting this for a friend to keep his identity private. He'll respond through my account, and wrote all the text below:
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.
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.
Below are the financials, maintenance, and tech information about the business. I'm going to keep the product itself private except to interested buyers.
# The Numbers
Users: 5522
Revenue (last 12 months): $76,201
Expenses (last 12 months): $2,521
Maintenance:
* During peak periods, there are ~2 support emails sent per day.
* Technical maintenance is sometimes required, average 4 to 8 hours per business quarter.
Technology:
* Python
* Tornado
* PostgreSQL
* AWS for hosting
* Twilio
* PayPal
Thanks! If you're seriously interested, please email me at [email protected] and I can give a more detailed rundown of the entire product, revenue numbers, etc.An open Ask HN community consultation from 2012 where @pearkes convened hundreds of developers and bootstrappers to share real experiences, hard numbers, and tactics.
Hundreds of active indie hackers contributed case studies, pricing heuristics, and pitfalls to avoid when moonlighting on side projects.
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.
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.
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.
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.
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.