Investors want buy my company

[drdax]

Hello, for the context - Im seeking advice.

Im 28 y.o and run business for 4 years. My business focus mainly on recrutiment process (we hire blue collars workers). Right now we hire from 350-450 people each month (depends on the needs of our partners). We provide the workers to the bigest companies in the central europe. In our office we hire 19 people which are managed mostly by me. Last month Ive been aporoached by the potential investor who like to buy entire company. Below more data

Company starts in 2020
2020 - 200.000 euro Income
2021 - 2.200.000 euro Income
2022 - 6.500.000 euro Income
2023 - around 7.500.000 euro Income

Ebdita for 2022 - 150.000 euro
Ebdita for 2023 - around 180.000 euro

Time for the payment from our clients varies from 7 to 14 days. Company has very healthy financial situation and cashflows. There are no properties or any form of loans.

Ive been offered 1.1 milion euro for the company (is it good value?) I will lend all knowhow, contact, contracts and of course non competition agreement.

 

[jonathanyahya]

@drdax 6x fcf is a fair offer. If you don't want to sell, ask for 7x. They'll likely tell you to come back next year with better EBITDA and they'll talk.

Don't fuck them off btw, you have a real opportunity here to make the rest of your life if you own 100%.

Edit - after 2-3 years, once your noncompete expires, you'll do this again if you want another crack at the apple. I know someone who starts and sells a recruitment business every 7 years or so. They're on their 3rd one now. They run it up to 2-300k USD in EBITDA and sell for 4-5x wait two years and do it again.

 

[drdax]

@jonathanyahya Thank you

 

[dovesong]

@drdax What will you do when you sell your company? I think that is the most important thing. Will you make use of that money for another business?

 

[drdax]

@dovesong I got second company which I created 2 years ago and want to grow. From financial point of view I can retire but as you might guess its not an option for now.

 

[dovesong]

@drdax Alright then it probably means you need to calculate what would be the benefit of investing in that company. Try to be a little pesimistic about what would your 2nd company give you after investment and compare it with your current status.

 

[drdax]

@dovesong There is no need to invest more than 10% of this 1 milion euro in new company. Whats the most important is to invest my time there

 

[lucash]

@drdax Is the second company in the same field? Careful with non-competes with the buyer.

 

[613jono]

@drdax Sounds like this answers your question, friend.

 

[halpme]

@drdax That's amazing what you did. How did you started this

 

[mrdp]

@drdax 1.1M Euro is 6 years of 2023 profits. Value of 6x profits in the US is an excellent valuation. Financially speaking only... sell. But if this is your passion and you don't know what you'd do otherwise then it's better to keep doing what you love. In 5 years you might get more.

 

[drdax]

@mrdp What would be the valuation in the US?

 

[mrdp]

@drdax I sold a business and received between 3 - 3.5x profits... this was in 2018 so can't really compare based on all the economic events between now and then. But I think it was a good valuation and was happy with it. You're probably better off with insight from someone where you live. Maybe 6x is the norm there...

 

[married1988]

@mrdp the multiple is very industry specific.

 

[mrdp]

@married1988 Very true. Good point.

 

[drdax]

@mrdp Im not in the US, central europe

 

[mrdp]

@drdax I figured you were not in the US using Euro's in your post.

 

[drdax]

@mrdp Hah, true

 

[justsumgai]

@drdax You should take into account your growth, how much more you think you can grow? in how many years can you make 1.1M ? you should think about the future not just the present, and be realistic

 

[elitheartist]

@drdax €1.1M for the business ( 6X EBITDA ) is fair for a small business that's growing and has been slightly profitable for a while.

That valuation applies to a business free of cash and debt, and with a normal working capital position (no account dues either direction that are outside normal course of business, and no peculiar liability).

You should expect an adjustment to price paid, increasing with net cash or decreasing if the business has debts or peculiar liabilities. (Obviously your business is worth 200k more if you have 200k in teh bank account.)

Last important questions:

1. would the acquirer expect you to stay on ? For how long? If so, ask participation in upside scenario
2. What's the market cost of replacing you? (This could have a big impact on business profitability either way)
3. Are you comfortable not working in this area for the foreseeable future?