I own 50% of a small business that does around 90,000 in revenue per year. After expenses, it’s closer to 70-75,000 for the total business net income.
If I wanted to sell my half to my partner, what would be a reasonable offer that I should accept?
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This sounds like a hobby, not a business worth buying.
You need a good business valuation with 36 months of projections in order to answer this question. Just saying what you do in revenue isn’t enough to make a decision.
You’d also need to analyze draws/payments from the business to determine accurate equity balances.
Do you and your partner earn the same amount from the business or do you put in similar levels of work to obtain that revenue?
Probably worth nothing, since your expenses does not account for your labor. Will probably be zero net income if you expenses your own labor.
Napkin math, around 100k. That’s if your 70k-ish is fully net
There’s people on here saying 300k. Please don’t listen to these people
How key are you to the business? Do you add anything now, and will your loss assuming you sell and are no longer involved affect it in any way? If I was on the other side this may affect how I structure a payment. If you are key and the loss is felt then a deal over 5 years to pay based on how the business does to buy you out. If not, and you just own half the business then 70k profit a year depending on growth at least a 5 multiple on that IMO and I would start around 175k.
Sell to someone else if he’s not happy with 3x
Are you including your salary (or fair value of your time) in the expenses? How easily is your role replaced by an employee?
If he doesn’t want to make you an offer, what’s preventing you from selling your half of the business to someone else? If that’s possible, take a look around for a better offer.
That alone might bring him to make a reasonable offer… he probably won’t want to risk potentially having to share his business with someone he doesn’t know, who could potentially be a wild card.
We need many details. $350k
The real answer is whatever the market will pay it, down to, and including, nothing. Everyone can say you pay this or that, but if your partner will pay .3 and you can’t find another person to pay you any more then you can either:
- Take the loss and settle for that amount to walk away
- Recreate this business and do it on your own
- Continue being partners
Most people try to get rich off of one deal/business having spent the entire time taking no money out of it, making no real money working in it, and put money back into it which is the entire antithesis of why you start a business to begin with.
3-5x sde would value the business at 210-375…half of that so 100-175
In all honesty it comes down to what someone is willing to pay for it rathe than what someone thinks it’s worth
How much could you sell it to someone else? Another employee or external investor (although it probably on the small side to attract such interest)?
If net income is defined as EBITDA, I would peg preliminary value at around $140K.
As for $30K assets, assume liquidation rate of 15 percent or $4,500.
This puts your half at $72,250.
Other factors that may affect calculation are financial history, type of business (service, product class), industry strength, business location, capital analysis, competition, etc.
Inexpensive way to obtain relatively accurate estimate is to engage business broker or consultant that has experience in your industry preparing valuation letter reports for your type of business.
Otherwise, you are looking at $4,500 or so for summary appraisal that could be used for legal purposes such as estate planning, court, partnership agreements.