subject: Will My Virtual Business Be Worth Anything If I Want To Sell It? [print this page] A question I get all the time is Will My Virtual Business Be Worth Anything If I Want to Sell It?
The answer is ABSOLUTELY, especially if you build it as a continuity business with recurring incoming cash-flow.
Why? Well, think of it as your cable or your web hosting company where you have to pay them month after month to use their services. Therefore to sell your business at a premium, you have to think from the perspective of the acquirer and focus on the value creation areas.
Some of them are:
1. Diversify your customer base: If your business depends too much on a few customers, it will be harder to sell. Aim for having a customer account be worth less than 5% of total sales.
2. Remove yourself from the daily operations: The value of a small business goes up in accordance to how efficiently it operates and how financially transparent it is. Its value grows as well, when an owner-manager becomes less central to its daily operations. A virtual business can help you increase the value of your company by implementing processes and digitizing operations.
3. Create Contractually Recurring Revenue: All revenue dollars are not created equal. Revenue dollars from a continuity programs or a contract for annual maintenance, annual licensing fees, a recurring retainer fee, technology license, etc. are much more powerful value drivers than projected sales revenue, time and materials revenue, or other non-recurring revenue streams.
The benefits of starting, managing and growing a virtual business are endless; especially when it comes to increasing the value of your company. Profitability is hugely important in a privately held company valuation, and because your overhead expenses are low, it allows you to maximize your business profits. This in turn means it can result in a significant market value increase.
Here is an overview of the best 7 virtual business (or small business) exit strategies:
1.Employees: A few methods to selling a virtual business to your employees are the ESOP (Employee Stock Ownership Plan), an MBO (Management Buyouts) and MBI (Management Buyins)
2.Charitable Trusts: This is a great strategy for those virtual business owners who want to benefit from charitable giving. A few methods are CRTs (Charitable Reminder Trust) and CLT (Charitable Load Trust)
3.Family: This is when you want to transfer your virtual business to your children or a family member. A few methods are gifting stock, GRATs (grantor retained annuity trust), FLPs (Family Limited Partnerships), SCINs (self-canceling installment notes), IDGTs (intentionally defective grantor trusts) and private annuities.
4.Co-owners: When buying out a partner the co-owner transfer channel is a good method. It includes buy/sell agreements, rights of first refusal provisions and other transfer techniques.
5.Retire and Sell to an Outsider: When retiring, numerous of the previous mentioned methods can be used. Such as charitable trusts, private annuities or grantor retained annuity trusts.
6.Continue in the Business but Sell to an Outsider: This strategy is usually implemented when an owner needs growth funds but does not want to invest personal assets. It can be sold to a private entity or to a public one.
7.Going Public: This is the process of offering securities (common or preferred stock) of a private company for sale to the general public.
You can see an example of a real sustainable, successful virtual business (100% virtual and paperless) at groupbenefitagency.com
