Can I sell my small IT business?
October 14, 2013 8:28 AM Subscribe
I run a small Mac support business in NYC. Most of my clients are small businesses, and are repeat customers going back several years. Customer loyalty is high. Expenses are low. Profits are reliable. Physical assets are few. I'd like to sell it, but I can't figure out if it's an asset — or if I'm the asset.
My business is heavily tied to my relationships with my clients. I have a part-time employee who many of my clients adore, but I still have unique knowledge that requires me to have an active hand in things. Yet ultimately, the skill set is absolutely standard, and there's enormous room for expansion in this market.
I work with a discerning class of upper-class, small-business clients, and a potential buyer would need to be sensitive to their unique needs. To that end, I suspect my business is both too small and tailored too narrowly to appeal to a business broker. I also suspect that if I tried to sell the business online, most potential buyers would not be equipped to handle the interpersonal (non-technical) needs of my clientele.
So here are my questions: is there a way to sell this on my own? Is it wise or unwise to directly approach other small businesses operating in the same niche to gauge their interest? Do you have experience buying or selling a similarly-sized small business in NYC, and are there obvious pitfalls or resources I should be aware of? Should I just roll down the shutter?
My business is heavily tied to my relationships with my clients. I have a part-time employee who many of my clients adore, but I still have unique knowledge that requires me to have an active hand in things. Yet ultimately, the skill set is absolutely standard, and there's enormous room for expansion in this market.
I work with a discerning class of upper-class, small-business clients, and a potential buyer would need to be sensitive to their unique needs. To that end, I suspect my business is both too small and tailored too narrowly to appeal to a business broker. I also suspect that if I tried to sell the business online, most potential buyers would not be equipped to handle the interpersonal (non-technical) needs of my clientele.
So here are my questions: is there a way to sell this on my own? Is it wise or unwise to directly approach other small businesses operating in the same niche to gauge their interest? Do you have experience buying or selling a similarly-sized small business in NYC, and are there obvious pitfalls or resources I should be aware of? Should I just roll down the shutter?
Maybe you could find someone who has a technical and social skillset similar to yours who would be interested in taking over the business, and if they don't have money to pay you for it, they could pay you over time. You could introduce the person over some period of time to the work and the clients to ensure a smooth, and thus profitable, transition.
posted by Dansaman at 9:08 AM on October 14, 2013 [2 favorites]
posted by Dansaman at 9:08 AM on October 14, 2013 [2 favorites]
You are going to need an attorney if you are going to sell a business. One of the things an attorney can do is help with initial inquiries.
A few general thoughts.
Your business has value, even if you are no longer doing business. Just shutting it down could also have a cost to your reputation. So yes, it is worth trying to sell.
The most obvious route is to sell it to your part-time employee for a share of future revenues, but it doesn't sound like you think your part-time employee is interested or able to run the thing on his/her own.
The next option is to sell to someone who already has a similar business. Part of the challenge here is that if you approach them on your own, they may just decide to start poaching your clients. This is one area an attorney could help, by making the initial approach and getting some sort of agreement in place before revealing details.
Just is valid is marketing the business to people who don't do the same kind of business, but want to be. Perhaps there is someone with a PC consulting business who would like to get a foothold in the Mac market. Maybe there is a high-end home-AV consultant who wants to add Mac consulting. Maybe there is some Mac person who wants to start their own consulting business.
This might be particularly interesting to people from outside of NYC who want to move to NYC and would rather buy you out vs building their own client base.
posted by Good Brain at 9:13 AM on October 14, 2013 [1 favorite]
A few general thoughts.
Your business has value, even if you are no longer doing business. Just shutting it down could also have a cost to your reputation. So yes, it is worth trying to sell.
The most obvious route is to sell it to your part-time employee for a share of future revenues, but it doesn't sound like you think your part-time employee is interested or able to run the thing on his/her own.
The next option is to sell to someone who already has a similar business. Part of the challenge here is that if you approach them on your own, they may just decide to start poaching your clients. This is one area an attorney could help, by making the initial approach and getting some sort of agreement in place before revealing details.
Just is valid is marketing the business to people who don't do the same kind of business, but want to be. Perhaps there is someone with a PC consulting business who would like to get a foothold in the Mac market. Maybe there is a high-end home-AV consultant who wants to add Mac consulting. Maybe there is some Mac person who wants to start their own consulting business.
This might be particularly interesting to people from outside of NYC who want to move to NYC and would rather buy you out vs building their own client base.
posted by Good Brain at 9:13 AM on October 14, 2013 [1 favorite]
Best answer: It sounds like it would be a tricky proposition--you're a one man consulting business, with some going concern value in your customer list. But if the work really is a standard skillset, a potential buyer would have to be certain that the customers would stay after you left, because of your special client skills. If I have my own technical expertise AND my own special client skills, I'd just compete against you--since there is "enormous room for expansion in this market," I'd build my own customer list rather than pay for yours with a chance of losing them when you leave.
So, as Dansaman says, one option would be to bring someone on as a partner or junior partner to learn the ropes and take over the business. But you'd run a real risk that you'd teach them all the soft skills that they need and then they could just leave to start a competing business (possibly poaching clients, or maybe not, given the room for expansion).
So based on what you've written here, no, this doesn't sound like an easily saleable business--but if you're looking to close down shop anyway, you lose nothing by looking for a buyer, since you would be losing any value to the client list when you stop work.
posted by Admiral Haddock at 9:14 AM on October 14, 2013 [1 favorite]
So, as Dansaman says, one option would be to bring someone on as a partner or junior partner to learn the ropes and take over the business. But you'd run a real risk that you'd teach them all the soft skills that they need and then they could just leave to start a competing business (possibly poaching clients, or maybe not, given the room for expansion).
So based on what you've written here, no, this doesn't sound like an easily saleable business--but if you're looking to close down shop anyway, you lose nothing by looking for a buyer, since you would be losing any value to the client list when you stop work.
posted by Admiral Haddock at 9:14 AM on October 14, 2013 [1 favorite]
I used to work (about five years ago) for a very similar Mac shop in NYC. Most of what my coworker and I did was home and small business tech support visits, many of whom were high-end clientele (celebrities with NYC homes, satellite offices for EU ad firms, smaller media companies and the like) so we were versed on handling the sensitivities and needs of this type of client.
I know they are still around, so if you are interested in reaching out to the owner of this organization to see about opening dialogue for potential payment for your client list/contracts, MeMail me and I can pass along his info. Of course, it goes without saying that if he expresses any interest, you should immediately involve an attorney.
(Full disclosure: No conflict of interest here, I was actually fired from this position, though for perfectly valid reasons, so no animosity exists on my part.)
posted by Debaser626 at 9:27 AM on October 14, 2013
I know they are still around, so if you are interested in reaching out to the owner of this organization to see about opening dialogue for potential payment for your client list/contracts, MeMail me and I can pass along his info. Of course, it goes without saying that if he expresses any interest, you should immediately involve an attorney.
(Full disclosure: No conflict of interest here, I was actually fired from this position, though for perfectly valid reasons, so no animosity exists on my part.)
posted by Debaser626 at 9:27 AM on October 14, 2013
Best answer: You will need a very good fit in order to sell the business. What you bring to the table is a book of loyal business but in all fairness this isn't a durable advantage. Ideally someone would have a business where they are about 5x larger but focus on exclusively on the PC or server market and they want to branch our diversify. You would likely need to be on retainer for 6-12 months to train up one of their staff to head up that side of things.
The challenge really is that it seems like nearly all the revenue involves you trading hours for dollars, but you want to get out. Your best bet is if the part time person has an interest. Even if they can't pay now you could set up a multi year payment plan to transfer ownership.
posted by dgran at 9:46 AM on October 14, 2013
The challenge really is that it seems like nearly all the revenue involves you trading hours for dollars, but you want to get out. Your best bet is if the part time person has an interest. Even if they can't pay now you could set up a multi year payment plan to transfer ownership.
posted by dgran at 9:46 AM on October 14, 2013
The traditional method of selling a business where a large portion of the value is your personal goodwill is for you to stay on board for a while in some sort of consulting capacity (or even as an employee) to transition to the new owner. This way you can help set up the existing relationships with the new owner.
posted by bitdamaged at 10:31 AM on October 14, 2013
posted by bitdamaged at 10:31 AM on October 14, 2013
One of my relatives did this and it went badly. Turns out he was an asset. The buyer brought him back in as a consultant and that was difficult for relative and clients because business was now done on buyer's terms. Eventually, clients saw relative as part of the problem and took their business elsewhere.
Financially, it was not a bad move. However, relative was distressed by watching what he had built fall apart and has irrational (I think irrational) regrers about betraying clients.
However, there are a million stories in the naked small business market and if you are ready to walk away, then talk to a lawyer.
posted by Lesser Shrew at 12:28 PM on October 14, 2013
Financially, it was not a bad move. However, relative was distressed by watching what he had built fall apart and has irrational (I think irrational) regrers about betraying clients.
However, there are a million stories in the naked small business market and if you are ready to walk away, then talk to a lawyer.
posted by Lesser Shrew at 12:28 PM on October 14, 2013
I'm in a similar situation, albeit in a different business. As I'm looking to wind down my involvement and eventually retire, I've brought on two people with similar skillsets, trained them in the particulars of my business and what the clients expect, and use them as subcontractors. This gives me a revenue stream for managing the business and I expect one of these two will want to buy the business from me when I'm ready to back out completely.
Feel free to MeMail me if you want more details.
posted by DrGail at 2:09 PM on October 14, 2013
Feel free to MeMail me if you want more details.
posted by DrGail at 2:09 PM on October 14, 2013
Best answer: I also ran a one-man Mac-support practice in NYC more than ten years ago. I also looked into selling it.
My conclusion was that I was the asset. I was not incorporated, had no physical assets, and also no contracts with clients that would guarantee that clients I handed off would stay handed off.
I ended up simply handing the clients off through introductions to trusted acquaintances and friends, so that I knew my clients were in good hands, and so that I was doing a favor to good people. (It's no small thing to hand over clients worth about $30K a year apiece to other one-man support practices).
posted by Mo Nickels at 2:42 PM on October 14, 2013
My conclusion was that I was the asset. I was not incorporated, had no physical assets, and also no contracts with clients that would guarantee that clients I handed off would stay handed off.
I ended up simply handing the clients off through introductions to trusted acquaintances and friends, so that I knew my clients were in good hands, and so that I was doing a favor to good people. (It's no small thing to hand over clients worth about $30K a year apiece to other one-man support practices).
posted by Mo Nickels at 2:42 PM on October 14, 2013
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Does it have its own phone number that you could transfer to someone else?
posted by jon1270 at 8:33 AM on October 14, 2013