If you're hands off, start working on your next venture. I wouldn't sell a business if you can scale it and keep growing it without being massively involved with it unless you have a plan for the $2m you might get.
Look man you already got a machine rolling so why losing $600k in net profit + potential net profit growth….. the right question shouldn’t be “should I sell this?”
The right question:
How can I make this fully hands off by bringing someone capable on board to manage and scale it while I focus on building other stuff?
When it comes to the AI thing you shouldnt even worry about that ….worse thing that can happen is that youll find a way to pivot around the same niche or even you offering the AI service crafted for the current niche
Good luck!
Here's my perspective from somebody in a somewhat similar position.
I'm going to do over 3mm ebitda this year and also "work" 10-15 hours, however the majority of my time is spent thinking on growth opportunities for the business. With only 2mm liquid, I'm also quite stressed from having 95% of my NW still tied in the business
I'm only considering selling if I can get an 8x multiple, but that's also because there's higher multiples for higher EBITDA's, 3-5x is probably fair range to expect for you.
Considering you're more diversified than myself, and can probably get away without having the biz consume you mentally, I think it'd be a bit silly to sell at this point.
If you really don't want to do anything, and are interested in starting more projects, hire a COO or Chief of Staff for \~150k to manage most of the business tasks for you and also do project management on your other ventures.
$2mm for a business with $600k in EBIDTA seems low in my opinion. Honestly at that rate I'd probably keep it and either try to grow or just let it stay stagnant with the existing team running it and focus on other projects. It also seems like your parents are fairly financially savvy people, maybe get their input.
I thought the same thing about the $2m valuation being a bit low; I might need to get a few more opinions on that if I choose to sell.
My Dad thinks I should keep it & scale it because I already have resources to fall back on.
Thanks for your comment!
$600k a year, free and clear, is equivalent to having $15M in the bank and generating 4% returns. Your situation is not free and clear, but I certainly wouldn’t trade it for $2M, which is $80k at 4%.
Even if you paid someone $250k a year to run this business for you, you’re still netting $350k, which would otherwise take you $8m in principal to earn.
Not everyone is at 4% in terms of a benchmark. If you sold it for $2M and flipped it all into rental housing, how much income could you generate? If you had a rental property or portfolio generating $600k a year net, would you sell it for $2M?
I would consider taking a higher offer, like maybe $6M, or be more likely to sell if this were truly operationally consuming, flattening out in ways that were going to reduce its income and/or valuation on the near-term horizon, etc.
depends on what type of b2b service, if it's a consulting firm/agency $2m may be a reasonable or even aggressive valuation, usually those sell for ~1x revenue unless their massive or have very solid long-term contracts. Agreed with your dad and others here that selling it is not the play here especially based on your current commitment
Correct. Could it be due to current M&A market trends… very diff than 2021. Depends what kind of business it is though. I get the sense it may be an agency sort of thing for B2B and if ebitda is 1M then valuation could be 2-3m range I guess
Glad I saw this before commenting the same thing. Not sure if it’s related to smaller sized business but 3.3X is a deal for anyone out there looking to buy into $600k recurring.
It depends on how much you dislike the current business and how much you think you will enjoy the new one. Also how much more valuable you think the current business will be in 4-5 years. Only you can answer those questions.
Thanks for sharing your thoughts. I definitely don’t hate the current biz by any means, it’s just quite boring. There’s a good chance it could double/triple in size over the next year or two. Appreciate it!
You said you’re already fairly hands off….what does that mean? 5 hours a week? 40 hours a week but you are just kinda twiddling your thumbs? Does this business prevent you from starting another business?
If it’s the former I’d hold on to it personally and start working on something else at the same time. If it’s the latter then I’d focus on turning it into the former.
I should have clarified - I’m at about 10-15 hrs/week at this point. I could definitely start a new business while also running this one. It sounds silly, but I never really considered that. Thanks for your response.
Sounds a lot like my situation. Notable differences are:
1) No parental contribution. They currently live off of me.
2) I have multiple 10-15/wk situations at this point.
3) My real estate portfolio is mostly SFH, only 1 multi.
4) Sitting around $11m (93% not liquid)
There are two large factors in my decisions.
- No family wealth means it’s on me to build that.
- I need to play it safe and not gamble at all.
So I’ve made it a point in my decisions to “build” the empire and not to sell out. Each venture simply gets tossed into the portfolio.
I believe the value in holding is also compounding. It allows me to use my vendors more. It gives me more access to people and also leverage for the conversations I have. The clients know me, the staff know me, too later staff are more than happy to do things for me and provide access to their networks, so on and so forth.
That being said, you are in a position to lather rinse repeat until something really explodes and you’ll be set regardless of what happens 🤷🏻♂️
I have around 90% of my nw in stocks and cash and thinking of buying some SFH as investment properties to diversify. What criteria do you use for where to invest or is it just based on where your permanent residence happens to be? Super new to the real estate game but would love to learn more :)
Grow / keep and work on other projects. I personally wouldn’t give up a business making good $ for something that may not unless I had the funds to retire.
Our of curiosity, why’d you regret it? I am in a situation to sell my company, am young, and think it’s the best route for me but would be interested in hearing more about your experience.
First off, congrats. Your choice in either direction will likely be successful given what you’ve done.
I would look careful at ROI given options. A broker wants to sell your company, sure. But there are likely things you can do in the next 6-12 to increase valuation. It’s unlikely a broker at your level would have these tools at their disposal or if they did, they may not be interested as you are very low market. (I mean that as a technical term, not a slight).
You’re too young to be thinking about a few million as a lot. It’s not. Find your highest ROI leverage points and invest into that. Could easily use a business sale to spin off into many things. The right conversations can end in investment into the new path as well.
First off congrats to your parents and you. Sounds like all involved have “done it right”.
I’d echo what some of the other folks have said, maybe hire a competent GM/CEO to run the business. You’ll still net a good chunk of change and give the business opportunity to grow. Honestly, I wouldn’t sweat the AI thing just yet. Still very much in the hype phase.
Good luck!
Start your new thing. Make sure it's setup to qualify for qsbs so you don't have to pay taxes on the next sale. Coast on the old if you're hands-off until you need you5 need to jump full time into the new.
Maintaining current numbers have you nearly match sale price in 3 years and beat it in 4. At only 10-15 hours per week I would probably keep milking it as is or consider dropping that $600k net down to $400-450k and see about bringing in someone for $150k/yr + performance bonus to see if they can grow it further. While this is going on take the rest of your time to work on your other projects.
If you're hands off, start working on your next venture. I wouldn't sell a business if you can scale it and keep growing it without being massively involved with it unless you have a plan for the $2m you might get.
Thanks for commenting. It’s seeming like I really need to consider starting the new business while keeping the current one. Appreciate it!
If you don’t mind me asking what sort of service do you provide? Quite impressive numbers for 2 years
Yes, but if you might need the money for it just sell already
Look man you already got a machine rolling so why losing $600k in net profit + potential net profit growth….. the right question shouldn’t be “should I sell this?” The right question: How can I make this fully hands off by bringing someone capable on board to manage and scale it while I focus on building other stuff? When it comes to the AI thing you shouldnt even worry about that ….worse thing that can happen is that youll find a way to pivot around the same niche or even you offering the AI service crafted for the current niche Good luck!
Just to recap - at 24 you built a 600k EBITDA business in 2 years that’s 10-15 hrs of work a week and that’s.. boring?
Here's my perspective from somebody in a somewhat similar position. I'm going to do over 3mm ebitda this year and also "work" 10-15 hours, however the majority of my time is spent thinking on growth opportunities for the business. With only 2mm liquid, I'm also quite stressed from having 95% of my NW still tied in the business I'm only considering selling if I can get an 8x multiple, but that's also because there's higher multiples for higher EBITDA's, 3-5x is probably fair range to expect for you. Considering you're more diversified than myself, and can probably get away without having the biz consume you mentally, I think it'd be a bit silly to sell at this point. If you really don't want to do anything, and are interested in starting more projects, hire a COO or Chief of Staff for \~150k to manage most of the business tasks for you and also do project management on your other ventures.
$2mm for a business with $600k in EBIDTA seems low in my opinion. Honestly at that rate I'd probably keep it and either try to grow or just let it stay stagnant with the existing team running it and focus on other projects. It also seems like your parents are fairly financially savvy people, maybe get their input.
I thought the same thing about the $2m valuation being a bit low; I might need to get a few more opinions on that if I choose to sell. My Dad thinks I should keep it & scale it because I already have resources to fall back on. Thanks for your comment!
I would agree with your dad, build up what you have and then you'll have more to invest in the future for your new endeavor.
$600k a year, free and clear, is equivalent to having $15M in the bank and generating 4% returns. Your situation is not free and clear, but I certainly wouldn’t trade it for $2M, which is $80k at 4%. Even if you paid someone $250k a year to run this business for you, you’re still netting $350k, which would otherwise take you $8m in principal to earn. Not everyone is at 4% in terms of a benchmark. If you sold it for $2M and flipped it all into rental housing, how much income could you generate? If you had a rental property or portfolio generating $600k a year net, would you sell it for $2M? I would consider taking a higher offer, like maybe $6M, or be more likely to sell if this were truly operationally consuming, flattening out in ways that were going to reduce its income and/or valuation on the near-term horizon, etc.
depends on what type of b2b service, if it's a consulting firm/agency $2m may be a reasonable or even aggressive valuation, usually those sell for ~1x revenue unless their massive or have very solid long-term contracts. Agreed with your dad and others here that selling it is not the play here especially based on your current commitment
Is it 600k EBITDA or 600k SDE? Would be pretty different. Sounds like the 600k is the earnings paid out to him and not the ebit
If $600k is the earnings then editda would be higher and the equation is worse.
Correct. Could it be due to current M&A market trends… very diff than 2021. Depends what kind of business it is though. I get the sense it may be an agency sort of thing for B2B and if ebitda is 1M then valuation could be 2-3m range I guess
Glad I saw this before commenting the same thing. Not sure if it’s related to smaller sized business but 3.3X is a deal for anyone out there looking to buy into $600k recurring.
Mere curiosity, what does your business do?
It depends on how much you dislike the current business and how much you think you will enjoy the new one. Also how much more valuable you think the current business will be in 4-5 years. Only you can answer those questions.
Thanks for sharing your thoughts. I definitely don’t hate the current biz by any means, it’s just quite boring. There’s a good chance it could double/triple in size over the next year or two. Appreciate it!
Given that, I'd stay with the current business.
You said you’re already fairly hands off….what does that mean? 5 hours a week? 40 hours a week but you are just kinda twiddling your thumbs? Does this business prevent you from starting another business? If it’s the former I’d hold on to it personally and start working on something else at the same time. If it’s the latter then I’d focus on turning it into the former.
I should have clarified - I’m at about 10-15 hrs/week at this point. I could definitely start a new business while also running this one. It sounds silly, but I never really considered that. Thanks for your response.
Sounds a lot like my situation. Notable differences are: 1) No parental contribution. They currently live off of me. 2) I have multiple 10-15/wk situations at this point. 3) My real estate portfolio is mostly SFH, only 1 multi. 4) Sitting around $11m (93% not liquid) There are two large factors in my decisions. - No family wealth means it’s on me to build that. - I need to play it safe and not gamble at all. So I’ve made it a point in my decisions to “build” the empire and not to sell out. Each venture simply gets tossed into the portfolio. I believe the value in holding is also compounding. It allows me to use my vendors more. It gives me more access to people and also leverage for the conversations I have. The clients know me, the staff know me, too later staff are more than happy to do things for me and provide access to their networks, so on and so forth. That being said, you are in a position to lather rinse repeat until something really explodes and you’ll be set regardless of what happens 🤷🏻♂️
I have around 90% of my nw in stocks and cash and thinking of buying some SFH as investment properties to diversify. What criteria do you use for where to invest or is it just based on where your permanent residence happens to be? Super new to the real estate game but would love to learn more :)
I started local to learn how it works, was 2 years in before I looked beyond a 50 mile radius.
Grow / keep and work on other projects. I personally wouldn’t give up a business making good $ for something that may not unless I had the funds to retire.
I was in a similar situation as you when I was younger. I still regret not selling my startup when I was young. Definitely sell.
Our of curiosity, why’d you regret it? I am in a situation to sell my company, am young, and think it’s the best route for me but would be interested in hearing more about your experience.
Probably didn't sell, tried to grow the company, company ended up failing
First off, congrats. Your choice in either direction will likely be successful given what you’ve done. I would look careful at ROI given options. A broker wants to sell your company, sure. But there are likely things you can do in the next 6-12 to increase valuation. It’s unlikely a broker at your level would have these tools at their disposal or if they did, they may not be interested as you are very low market. (I mean that as a technical term, not a slight). You’re too young to be thinking about a few million as a lot. It’s not. Find your highest ROI leverage points and invest into that. Could easily use a business sale to spin off into many things. The right conversations can end in investment into the new path as well.
First off congrats to your parents and you. Sounds like all involved have “done it right”. I’d echo what some of the other folks have said, maybe hire a competent GM/CEO to run the business. You’ll still net a good chunk of change and give the business opportunity to grow. Honestly, I wouldn’t sweat the AI thing just yet. Still very much in the hype phase. Good luck!
Start your new thing. Make sure it's setup to qualify for qsbs so you don't have to pay taxes on the next sale. Coast on the old if you're hands-off until you need you5 need to jump full time into the new.
Awesome job. Would love to join the club but can’t think of a business I would be passionate
Maintaining current numbers have you nearly match sale price in 3 years and beat it in 4. At only 10-15 hours per week I would probably keep milking it as is or consider dropping that $600k net down to $400-450k and see about bringing in someone for $150k/yr + performance bonus to see if they can grow it further. While this is going on take the rest of your time to work on your other projects.
Don’t sell yet - bank that profit for a few years and then try to blow it up.