2022 - Reality check time - selling an online business

[TinkyWinky]

Just need a reality check about something I am thinking about (selling or buying part of existing business - sorry title a bit misleading I guess)

I own 40% of a business that has £150k t/o with about £100k gross profit per year (makes zero profit as we cover work through consulting charges to within £2k of the gross profit). If I wanted to buy out the other 40% shareholder only (or sell even) any idea on what sort of value?

Used to be a multiplier on a yearly profit - but I know this has changed.

Business 15 years old and a good performer for it's sector (is membership based). Has around 1000 paying members - which is declining year on year as competition increases. I am thinking if buying the 40% giving me 80% ownership, then 9-10 months gross profit (although I already take 50% of that number!)

Given it could fall off a cliff if Google and Bing throw toys out pram this seems about right - it's a risk and needs some serious work on the site and model over the next 18 months so investment required!

There is so much conflicting evidence - just wondering if anyone has similar experience with actual sales - rather than just conjecture from online 'gurus'.

 

[Adam H]

I guess really it depends on what the other 40% holder is actually prepared to take, you both know the business, risks and finances. It's tough, I've thought about selling up a few businesses and on the flip side buying out a few competitors over the last few years to fast track growth, there never seems to be a black and white senario.

 

[TinkyWinky]

Ha - I kind of walked in to that I guess.

This is my issue - it's almost how long is a piece of string time!

It's a relatively simple business to run - established and has good strong SEO standing - but the site and offering is "long in the tooth" and not offering anything new to members really. A reasonable churn rate of maybe 25% but seems to find 22-25% new members to cover it - just. Competitors are starting to offer more bells and whistles though.

What would you take a punt for? (obviously not knowing the field)

 

[JMI]

I'd want 2.5 x net profit, maybe a little less if ropey. Why not buy him out totally? At the moment you in a weak position as minority share holder so he could do whatever he wants which I don't like. I used to be 50/50 in two businesses but never again.

 

[DJ]

Surely the easy answer to this is you work out what you would want for your 40% to walk away. Then go to him with do you want to sell your share for this amount or buy me out?