Ask HN: How can I sell my hacker house business?

[realitygrill]

My friends and I run a hacker house in the Bay Area. It allows us to live for free in downtown Mountain View, be ramen-profitable, and give us the free time to try new startup ideas. We also met tons of great people, which is really going to help with recruiting later. One of our startup attempts is taking off, and so we’d like to sell our business quickly. Unfortunately it isn’t a very traditional business and we don’t have much of an idea of how to price this or find potential buyers.

The house makes about 90k/year in profit the year it opened, and could probably do better (~150k) with full time management by one person. That also includes a free 1 bedroom apartment. We’re likely more successful than most of our competitors because of our unique location and housing structure, which we aggressively scouted for.

Who should we target as a buyer? Other founders, hacker house chains, or somebody else entirely?

[godot]

This is probably a good place to ask as any; I might be interested myself (depending on the price point you're looking for), so I'm going to ask more questions:

- What price point are you looking for? 1 year profit, 2 year profit, so like $90-180k? (seems like a normal range for valuation of companies)

- For that matter, you mentioned 90k/year "the year it opened", implying that that was the first year and you're not on your first year now. Are you making more, less, same right now?

- What does running the business entail, what is the day to day operation like? Talking with residents and maintaining condition of the place?

- Does the day to day operation require living in the complex in Mountain View? (I know you mentioned it as a perk, but I own a house myself, with a family, elsewhere, and am not interested to move. Am I the wrong "target audience" to sell to?) [edit:] To clarify, I am in the bay area, but not in Mountain View. [edit 2:] To clarify again, I don't have a problem with commuting to MV to work here, I only mean that I don't intend to live there, and would probably rent out the "master rooms" also just as any other, if I run this.

[godot]

One more question, I read from your other replies below that there are 3 of you running this now. Does it take all 3 of you full time to run this? Or is it reasonable to operate solo?

[bluehat]

Didn't know how to handle this, so question merged to https://news.ycombinator.com/item?id=14809337

Short version, we spend one long day a week on the house. There are also checkins.

[bluehat]

We were honestly looking for advice here. I appreciate your interest, and would like to speak with my mentors before responding on the price.

The first year we only operated half of the space for the first two months. The second half was delayed by construction and opened in March. The uncertainty of construction meant we could not line up bookings ahead of time, and this impacted our Q1 and Q2 earnings for 2016. We also had the costs of opening the location, loan payments and opening a 2nd location.

In 2017 we finished paying off all of our loans, and have not opened any locations. While the year is not complete yet, we are ahead of where we were this time last year.

Daily operation of the place has a few major components. There are a number of contractors to coordinate, most notably our completely awesome cleaners and the repair contractor. The repair contractor requires coordination with the landlord and often subcontracts, so you occasionally need to be a little hands on with the subcontractors to make sure everything is done to the completeness which you intended.

The items with inflexible hours are checkins and reset. New residents require a welcome, an orientation, and supplies like sheets and towels. These hours are restricted to 5PM-7PM. Checkins happen 7 days a week but there aren’t checkins every day. Some residents have flight delays or weird circumstances which require other checkin hours.

House reset is currently on Mondays at 7:30PM. House reset is when all clutter is brought to the main area of the house, returned to its owner, or sent to goodwill. Residents also help roll out upgrades, like assembling IKEA furniture.

Mostly, cleanup functions as a way to get the residents oriented with the house and set behavior expectations. Residents frequently come off 6 to 20+ hour flights into their checkin. It is not reasonable to expect them to remember everything you tell them at that time. Residents learn a lot more during reset, particularly where all the bathrooms are and where they can find more toilet paper. They do not clean things aside from getting the kitchen sink and counters under control but reset is extremely important for house cleanliness. The data is extremely clear that residents who participate in cleanup make way way less of a mess in the house in general.

Reset is timeboxed strictly to one hour, and after that we serve snacks and drinks. That is the time when most residents get to know each other and we get to know them.

Chores are minimal, though you will wash a lot of laundry on season changes and you do buy a lot of toilet paper. Costco delivers.

We have never had a house head not live on their campus, though every house head runs their house differently. I’m not sure you need to live in the apartment, but you probably want some sort of community leader nearby and accessible. Some residents stay for multiple years, so promoting one of them might be an option. Having somebody accessible is important when residents lock themselves out, but also for setting house culture.

Honestly though, the opportunity to be positive part of people’s lives and a first community in a strange new place was a big upside for me. The residents eat at Thanksgiving with us, I’ve taught some of the younger kids how to cook, and on a few occasions I’ve held a resident’s hand in the hospital when their family was thousands of miles away. I like singing happy birthday to them, and they often come back to visit us. Also, we run the coolest trick-or-treat house on Halloween.

The residents honestly can be pretty awesome too. I feel guilty in that I probably get a lot more from them than I give them. Grad students are fascinating, and they come for every reason from research at NASA to the reading Stanford historical archives to working in Google Brain. I’ve gotten to try food from a lot of countries, and learned to cook a few of the recipes. I’ve learned a lot about a lot of cultures and picked up lots of fun slang and idioms (a favourite, from German, is “shooting sparrows with a cannon.”) Also my professional network has grown substantially including access to a lot of new fields. The cash is good, but I think you’d miss out on a lot of intangible upside if you weren't there.

As for the three of us running the place: I’m pretty sure one person can do it. Our schedule works like this right now: one long day a week of running the house, three days a week of building whatever startup we’re trying, and one day a week of studying. Because coordination is hard we think it is less work for just one person.

[godot]

Thanks for the detailed response, it's very helpful. I'd be down to meet up in person to talk a little more, maybe after you talk to your mentor and have a better idea on price range. Can you email me so we can arrange in private? [Edited out]

[bsvalley]

what are you selling exactly? a company? a condo? developers? apps? how do you make 90k/year? what's your business model?

Not sure your message was clear enough.

[realitygrill]

We rent bunk beds in shared rooms, mostly to people on fixed short term stays -- interns, visiting academics, founders in accelerators (particularly 500 Startups as they're extremely close).

We're selling the company itself.

[bsvalley]

Do you guys own the rooms or are you renting them out, then subleasing them to people at a higher cost per head? There might be some legal issues in this case?

[bluehat]

The company holds a lease on a small apartment complex

[mattbrewsbytes]

Why sell at all? I get that you want to focus on your startup but if time is the issue, then just hire someone to competently manage it like a property manager of sorts to setup renters the same way you do now. Pay them out of the $90k profit and you should still have profit left over for not much work at all.

Also, rents only go up right? The longer you hold the property lease it the more passive income you get.

[jklein11]

How long is the lease for? I really don't know the space that well but I would imagine it would be hard to get a premium for a one year lease. If its true that the major value add the lease is the one thing of value.

If you look at it from the buyer's perspective, they would be paying you for a job that pay's roughly 90k per year.

This is just my $.02 but I think it makes sense to hire someone to run this full time. For 90k + free room and board I would imagine you could find someone very competent to take it over. You would get the profits and likely make your business more marketable.

[bluehat]

If the company was still owned by us I do not believe a $90K salary is a given, especially prior to that person going full time to run the company at a higher efficiency.

We have reason to believe our lease is good indefinitely.

We think there are other things of value in the company than the lease. Starting one of these places yourself isn't cheap, easy or quick. Making sure your dorm is listed in new hire/intern/founder material takes time and connections, generally from former residents.

It also takes experience and skill to properly lay out houses and incentive structures which motivate residents to cooperate and be good to each other. Some of our systems are pretty elaborate. For example: we manufacture large batches of dish sets and silverware each with a different animal. Residents are assigned an animal, and only allowed to use the dish set with that animal. This has lots of utility: it means residents have to clean their dishes before making more dishes, it creates personal responsibility around abandoned dirty dishes so the kitchens do not become hellish, and it mitigates the variation in the definition of "clean" one might find between an undergraduate intern and a doctor doing their residency. We also believe it is a key piece of what has helped prevent the dorms from ever having a flu outbreak.

[rajeshp1986]

Why do you want to sell this? if you are profitable and making 90k/year then it doesn't make sense to sell it. I would say rather try building a brand. Expand to one more location and increase revenue. Struggle for few more years and have at least 3-5 outlets and then think of selling it. The way I see it is you have a good business model and there is a scope in the market for such thing. You should rather focus on expanding than selling it.

[bluehat]

We used this company to bootstrap software startups. One looks more promising than this company, and splitting our efforts up seems unwise.

Also, we need to travel for the software startup, and this isn't exactly a remote job.

It's more or less "one or the other" and we chose "the other."

[Kevin_S]

Huh.

This is super interesting to me. I don't live out in the valley though.

Would you consider essentially hiring someone to come and run the place? I actually think this is something I would be good at.

How did you get into this space? I may start to seriously look into this. I actually have a business idea I'm working on that is somewhat related.

[bluehat]

I started running these places to get an internship program I was in un-cancelled. When I ditched being an engineer to do nonprofit work I started another to make up the income gap but it was pretty casual. I met the OP and the 3rd person there. Together we decided to start running these places at scale to give us an infinite runway to bootstrap companies.

The three of us talked and we're open to somebody managing the place. We have done house head training when it is needed to open a location, but we like to have somebody experienced shadow them for a few months before going solo. The timelines are pretty tough for this house though. This is why we were going to sell the company for the location the three of us live in.

All of that said, if you're interested in having this conversation, we are willing to have it.

[leojg]

What is the difference with a hostel or a pension? For what I understand this is just that but with a fancy name

[bluehat]

Hostels take people over shorter periods, like weekends. Dorms have people for 3-6 months so they can complete an internship.

Hostels are fairly transactional. Dorms involve community responsibilities, including from the residents. This is everything from helping sort clutter each week to running a really cool house every year for the local trick-or-treaters.

Pensions are things where you don't have to work. This is a job, not a full-time job, but it still does require work. There is an aspect of running the place (we order a LOT of toilet paper from Costco) but also we are responsible for a community. We once had a resident whose parent died when they lived here, and yesterday a resident was hit by a car while biking to work (a long way from our place, and yes the doctor said he is fine. He more or less only lost some mustache).

These folks are sometimes a long way from home, often quite young (early undergrad), and sometimes foreign. We are their community out here, and often act as a sort of designated older sibling when stuff really gets real.

[davidbanham]

Miscommunication there.

https://en.m.wikipedia.org/wiki/Pension_(lodging)

Pension has a totally different meaning in Europe in the context of accommodation.

[leojg]

Hehe yes, I didn't remember the term in english, in my country a pension gives you a bed sometimes shared and sometimes on a private room but no food, but they have a kitchen where you can cook.

Anyways from what the OP describes his business is much more intensive and involved with his guests.

[bluehat]

Cool! TIL!

[arikr]

Is it legal?

Seems like if you have more than 5 bedrooms for guests it may not be?

https://patch.com/california/mountainview/hacker-hostel-ille...

[bluehat]

I am not a lawyer.

We operate very very differently than Chez JJ did.

Because of our community focus, the vast majority of the residents in the house at any given time are long-term, and here much longer than 30 days.

Even if this was not the case, this location is composed of more than one building and no building has more than 5 bedrooms.

Mostly, we have an excellent real estate lawyer.

[arikr]

Nice

[gcheong]

Have you considered hiring someone full time to manage it? You could include the apartment as part of the compensation and maybe provide some kind of profit sharing bonus incentive as well.

[bluehat]

Question merged to https://news.ycombinator.com/item?id=14808712

Short version: we're open to it. This said, normally house head training to work under our systems is longer and we like to have somebody experienced shadow the new person for a few months before going solo. We were worried about the timeline, so we were considering just selling the company that runs the location we live in.