Sell the business??
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@IRJ said in Sell the business??:
If that customer decides to cancel then they would lose everything you sold them. Which is why no one is willing to buy one SMB client. I'm sure you can find someone who can I take over for free, but I'd only worry about that on my way out.
As someone who has bought companies like this, this is exactly true. Even a three man shop with many clients, the value approaches zero. You only buy those kinds of companies if you are doing so to get the employees out from under a contract (e.g. they are under non-compete, so you by the company to own their non-compete.)
And even a much larger business than this, no one will buy "the company". At most their consider buying the customer list and the brand. But that would be a super rare case.
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@scottalanmiller said in Sell the business??:
@siringo said in Sell the business??:
If so, how do you work out what it's worth?
A one man IT support business is super easy to evaluate for purchase value: zero.
It's always zero. There's no "company" to buy, no product, no deals. Anything that your company owns is actually a liability rather than an asset at that size. You are the sole employee, when you leave, the entire value of the company leaves with you. So knowing what the company is worth is super easy.
In theory, your company has a customer list to "sell". And that has value, if they are under some kind of contract. But then only a small value. In general, buying huge numbers of customers where you can safely estimate that you'll keep 50% no matter what, allows you to have some value in an exchange like this, and that comes from having lots of customers and lots of staff and lots of resources that are staying the same and only the owner changing.
But when the owner and the company and the staff are all the same person and you leave, to your customers it's not "the company got bought" it's "our outsourced employee quit and he recommended this other one." They might stick with the new guy, they might shop around, they might decide to drop support entirely, they might take the opportunity to hire a nephew. It's a trigger to shop around and it's almost expected that they will.
So someone buying your "company" is getting potentially nothing at all. If they are getting something, they are just buying your employment - literally buying a job. So what is the value in buying the job that you are doing, if it might not even exist the next day?
Exactly what I said - only better worded.
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@Dashrender said in Sell the business??:
It's likely not really worth much at all, it might be worth 1 year income at best
OMG, no way. Maybe 1/1000th of a year's net income, tops.
Think of it this way. Let's say his contract bring in $100K a year. You have at least a 50% chance of the customer cancelling the account on the first day, and at least a 5% chance of them cancelling every calendar year after that, just the churn of vendors, and a 10% chance of the customer just going out of business (this happens way more than you'd guess) and/or being bought by someone with their own internal IT already (we see this about once a week in our customer pool.)
So you PAY a year's salary for the "right" to work a job for the amount of that salary.... that means that you'd have to work a lifetime with that client to "approach" earning as much as you'd likely earn from just working a normal employment job. Paying a year's salary out in advance to "buy the job" means you have this massive loss of investment to recoup and no means of recouping it because you didn't buy a functional company but just the right for you to work a job.
So even if the customer was guaranteed to never leave, ever, it would be unlikely to be worth anywhere near one year's income to buy the right to work that job. Add in the near certainty that the customer will leave you in the next five to ten years and there's no real possibility of ever making it make sense financially.
And unlike a normal job where you get raises, promotions, new opportunities, you are tied to the one job you bought up front.
I'm glossing over lots of potential opportunities that buying a contract can have, but they are mostly super high risk or pie in the sky that is so unlikely that you can't put money down on it.
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@IRJ said in Sell the business??:
@Dashrender said in Sell the business??:
@wirestyle22 said in Sell the business??:
@siringo said in Sell the business??:
I am the sole support person for a medical clinic business. I've been supporting them for around 7 years.
When I started it was a simple 2 server business with 1 external site and in house Exchange.
Now they have 7 sites and all the things that go along with that.
I'll be wanting to get out of this IT game in about 4 years & spend my days on the beach.
So the question is, how do I go about finding someone to take over the support of this client without doing myself out of a job & income before my beach days arrive?
It's not just about trying to find an alternate support solution for what happens in 4 years, it's for now mainly, due to me being the only person who knows their entire IT setup. If I get hit by that bus, they will be in trouble.
The business has sites in rural areas which from time to time will require on site visits, so more than online only support will be required.
Should I sell the support service as a business? If so, how do you work out what it's worth?
Just interested to hear the thoughts of others.
I'd probably create as much documentation as humanly possible and hand it over to an MSP that you vet. Getting rid of the single point of failure (you) is important. Your documentation is what dictates how smooth the transition will be.
huh - Not sure I'd give it to the MSP - instead give it to the business, let them decide who it needs to go to... if you can be part of the vetting process for your replacement, great, if not, not your concern.
I agree with you dash. Who gives a fuck if you're retiring and hand over documentation.
Well, his job NOW is to care. So he's doing the right thing. Once he leaves, sure, THEN he doesn't care. But until he actually does leave, he's paid (presumably) to care a lot and that's what he is doing. So this is the perfect discussion to have now.
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What you CAN do, if you can find a business that does this stuff, is sell the customer (and potentially some branding or whatever) to an MSP/ITSP that is capable of operating that portion of the business and bringing it into their fold and works with you to maintain the account. Generally for this kind of thing you'd start working with them soon to be part of the support process, share documentation, and do a gentle migration over time. We've done this several times and there are ways to do this, but it's not a "sell the business" approach, it's a long process of moving the client over, over time while getting paid for them over time. This works because it's a shared risk agreement where you get very little if the client is lost, you make bank if they grow them, and it's in both of your interests to work together to make sure that it goes smoothly.
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@scottalanmiller said in Sell the business??:
@IRJ said in Sell the business??:
@Dashrender said in Sell the business??:
@wirestyle22 said in Sell the business??:
@siringo said in Sell the business??:
I am the sole support person for a medical clinic business. I've been supporting them for around 7 years.
When I started it was a simple 2 server business with 1 external site and in house Exchange.
Now they have 7 sites and all the things that go along with that.
I'll be wanting to get out of this IT game in about 4 years & spend my days on the beach.
So the question is, how do I go about finding someone to take over the support of this client without doing myself out of a job & income before my beach days arrive?
It's not just about trying to find an alternate support solution for what happens in 4 years, it's for now mainly, due to me being the only person who knows their entire IT setup. If I get hit by that bus, they will be in trouble.
The business has sites in rural areas which from time to time will require on site visits, so more than online only support will be required.
Should I sell the support service as a business? If so, how do you work out what it's worth?
Just interested to hear the thoughts of others.
I'd probably create as much documentation as humanly possible and hand it over to an MSP that you vet. Getting rid of the single point of failure (you) is important. Your documentation is what dictates how smooth the transition will be.
huh - Not sure I'd give it to the MSP - instead give it to the business, let them decide who it needs to go to... if you can be part of the vetting process for your replacement, great, if not, not your concern.
I agree with you dash. Who gives a fuck if you're retiring and hand over documentation.
Well, his job NOW is to care. So he's doing the right thing. Once he leaves, sure, THEN he doesn't care. But until he actually does leave, he's paid (presumably) to care a lot and that's what he is doing. So this is the perfect discussion to have now.
I did say to hand over documentation. It sounds like he doesn't even have that. We all agree that documentation is his job. So that he can walk out the door one day and not care what happens after that moment. He can feel confident giving the company documentation that is well written and available for anyone.
That's why I said hand over documentation. Other than that don't give a fuck because as you and I mentioned the "company" is worth zero. So why put in any effort into finding a replacement. Someone will always take the work.
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@scottalanmiller said in Sell the business??:
@Dashrender said in Sell the business??:
It's likely not really worth much at all, it might be worth 1 year income at best
OMG, no way. Maybe 1/1000th of a year's net income, tops.
Think of it this way. Let's say his contract bring in $100K a year. You have at least a 50% chance of the customer cancelling the account on the first day, and at least a 5% chance of them cancelling every calendar year after that, just the churn of vendors, and a 10% chance of the customer just going out of business (this happens way more than you'd guess) and/or being bought by someone with their own internal IT already (we see this about once a week in our customer pool.)
So you PAY a year's salary for the "right" to work a job for the amount of that salary.... that means that you'd have to work a lifetime with that client to "approach" earning as much as you'd likely earn from just working a normal employment job. Paying a year's salary out in advance to "buy the job" means you have this massive loss of investment to recoup and no means of recouping it because you didn't buy a functional company but just the right for you to work a job.
So even if the customer was guaranteed to never leave, ever, it would be unlikely to be worth anywhere near one year's income to buy the right to work that job. Add in the near certainty that the customer will leave you in the next five to ten years and there's no real possibility of ever making it make sense financially.
And unlike a normal job where you get raises, promotions, new opportunities, you are tied to the one job you bought up front.
I'm glossing over lots of potential opportunities that buying a contract can have, but they are mostly super high risk or pie in the sky that is so unlikely that you can't put money down on it.
I did say MIGHT.... i agree, the likeliness that it's worth anything is extremely low...
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@IRJ said in Sell the business??:
I did say to hand over documentation. It sounds like he doesn't even have that. We all agree that documentation is his job.
For sure, that's the core of the job more than anything else.
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Thanks everyone for the input, it has helped with a few things.
There is documentation to hand over, it does need some updating which is what I'm doing.
Let's forget selling the business, I've thought more about this and realise it is something that won't happen.
Wondering what others think of this? How much responsibility should the client take / should have taken, for them not to have ended up in this situation?
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@siringo said in Sell the business??:
Thanks everyone for the input, it has helped with a few things.
There is documentation to hand over, it does need some updating which is what I'm doing.
Let's forget selling the business, I've thought more about this and realise it is something that won't happen.
Wondering what others think of this? How much responsibility should the client take / should have taken, for them not to have ended up in this situation?
it's completely on them. They choose their IT support.
