A “micro” is any business that turns over less than $250K a year. So, the business I sold this week most definitely falls into that category! Instagram, it was not.
I had been running Hire An Umbrella as a part-time, ‘on the side’ business for five years. I was over monthly accounts and stock ordering. I was ready to cash in, and move on.
Once I’d made that decision, I listed my business on Business Trader. I chose Business Trader because is ranked No. 1 in Google when I searched for “buy a home business” and various similar phrases.
The whole process, from listing my business through to the sale, took only four weeks. While it wasn’t sold for a newsworthy amount, it’s allowing me to take time out to travel for a couple of years. Then, I’ll get to work creating something else.
So, in celebration of the HUGE gap between the sale price of my business and, that of a 20-something-millionaire-entrepreneur on the other side of the world (cough, cough, Instagram’s Kevin Systrom), here are three things I learnt from selling my micro-business:
1. Don’t get a business evaluation
No seriously! I was told this by two independent business valuers; it’s not worth the money.
Most valuers charge at least $3,000 to value your business. So, when you’re selling around the $100K mark, that’s 3% of the sale you’re giving away! What IS useful is a business ‘appraisal’ for approximately $500. The appraisal is still performed by valuers and, will give you a basic independent idea of what your business is worth. Plus, it includes some numbers to show off to prospective buyers, without the extensive work of a full valuation.
I still can’t work out what I would have paid the extra $2,500 for, as this was all that I needed.
2. Give lots of detail up front
The ‘micro-business’ market is littered with ‘great opportunities’ and ‘regretful sales’. Those that get attention mention real revenues up front. The companies that go into detail about the operation of the business and potential growth opportunities, are the ones that get serious consideration on Business Trader.
Don’t give away financial details or trade secrets but do whet the appetite in the advertisement; this isn’t the right end of the business-buying market to be listing ‘POA’ price.
3. Screen buyers
Any buyer who contacted me made contact was required to have a phone conversation with me, before I sent the PDF with more information. Screening buyers does three really good things:
- It let’s you weed out those who aren’t really interested. I was amazed at the number of people who didn’t bother to return my call or email. You don’t need private financial information to tyre-kickers.
- It let’s you tell the story. A sale is all about emotion; the phone conversation allowed me to find out what was motivating the buyer’s interest and,
- It raises the buyers’ expectation and, gives the impression you’re serious, not desperate. Getting potential buyers to justify to you why they would be a good owner for your business, gives you a psychological advantage.
Of course, the usual advice around selling a business is still true even for a small sale. The most important consideration is understanding buyer motivations. Try to choose a buyer who has a reason for acquiring your company, they will pay more for a company that is a strategic fit.
The final offer I accepted was three times more than an offer made by a typical ‘business investor’ contact. The buyer of my business is a stay at home mum. She had some equity in her house and wanted a work-from-home opportunity, the sale was the perfect strategic fit. Plus, it was a great deal for both of us.
I wonder if Facebook is saying the same thing about Instagram?
Clair Maurice is a 26 year old entrepreneurship student at Swinburne University, who just sold her first business (Hire An Umbrella). She is now about to set off to experience ‘1000 Days of Summer’ around the world! Follow her thoughts and travels on her blog Significantia.