[gamechangr]

That's pretty fair where you have it.

The argument would be how many hours does it take to manage. If it's very, very little - it might be worth more.

I have bought and sold a few businesses. Even getting six figures is actually high.

My business broker always said take away loan repayment before putting a number to it. They always calculate from 80% loan - before establishing a price. So they would take $95k (I will make it 100k) and pretend the buyer takes on an 80k loan. They would estimate payments as maybe 8-10k a year.

So they would take $95k - (8k for loan services - fake buyer situation ) and say the remainder is the price. In your case it would be $85 - $87k.

Hope that helps.

[nostrademons]

It seems silly to sell a business that generates $85K/year in passive income for $85K. Just wait a year and bank the income.

I plugged some of the numbers the OP gave us into an NPV calculator [1], assuming that the $85K/year drops by $5k each year as advertising economics deteriorate, and got a NPV of of $345K assuming a discount rate of 3% (which is around what you can get with T-bills these days). Purchasing it for $85K implies an IRR of roughly 90%, which is a really, really good investment.

The going rate for small passive-income businesses I've heard is around 4x revenues, a bit less if they require significant maintenance or the revenue is declining, which is roughly inline with what the NPV calculations give.

[1] https://www.calculatestuff.com/financial/npv-calculator

[gamechangr]

This is nuts....4x revenue?

It would have to make $10,000,000+ for that to make sense.

I really don't want to argue and respect that there are many opinions out there (we all can have one), but OP please ask around to an actual business broker. I have on three businesses this year.

The amount of revenue is really important. Basically - can a buyer imagine living off the business? What's his opportunity to cost? (like it takes 15 hrs a week away from other investments). How much capital would someone need to build it from scratch (might be time in your case).

That's what I ask when I am considering buying.

[nostrademons]

I think the contrast between our replies is illustrative of why there's so little liquidity in small businesses.

Mine was basically "In strictly financial terms, you're nuts to sell for $85-100K." Yours was "As a buyer, you're nuts to buy for more than "$85-100K." What's going on economically is that transaction costs will eat up most of any surplus for a business worth < $1M, and so both statements are true.

In practice, the small business owners I know usually just milk their business into the ground. They treat it like an annuity that generates $X of additional income, and if it ceases to become profitable or worth the trouble, they just shut it down.

[gamechangr]

Agreed.

> the small business owners I know usually just milk their business into the ground.

You're right... I see it all the time. It's hard to someone to even want to buy enough to make an offer. If they do... I always try to flip the role.

"how much would you offer for a business that supposedly made $95,000 - in an industry that you maybe unfamiliar with?"

That's what a buyer would pay.