Selling a “Solopreneur” Business
25 April 2022: Selling a “Solopreneur” Business
Selling a “solopreneur” business is fraught with pitfalls – or so most people seem to think.
Owners of so-called “solopreneur businesses” often believe that their business can’t be sold because without them, there IS no business. This topic came up recently in a family gathering. You see, I’m related to such a business owner and selling a solopreneur business was a concept that needed some discussion – particularly since she started talking about wanting to retire in five years.
The business in question is an event planning business. It plans everything for events large and small; from weddings and birthday parties to industry conventions and corporate cruises. The owner, a woman of some substance, started the business about 12 years ago and operates it from home; well, from anywhere, actually.
The Business
There are tens of thousands of “events” held around the world every year. From small celebration parties for wedding and employment anniversaries; product launches for the likes of Audi, Apple, Tesla, etc.; entertainment events for celebrities; movie launches for studios; grand openings of malls, schools and museums; company start-up launch parties; industry conventions; corporate retreats; milestones reached, etc., the list is nearly endless.
As I write this post, I’m preparing to leave in ten days for the International Business Brokers Association’s annual conference in Denver, US. I’ve reserved a room in a block dedicated to the conference’s attendees and will attend various functions – from the kickoff party, complete with entertainment, to breakfasts featuring prominent industry speakers.
From professional business brokers and broker-wannabes to industry vendors and IBBA management, there will be more than a thousand people at this highly anticipated event. Somebody had to coordinate all this and for a conference of this size, there are large event-planning companies around the world.
But there are countless smaller conferences, conventions and corporate events that happen every day and are handled by small, often one-person planning businesses – “solopreneurs” – like the one my relative owns.
Though her business is a solopreneur business, if we look at it closely, we find that it’s set up like any other business. It has various “departments” and “department heads” that provide the various services that each event requires. But instead of those departments being in-house and headed up by employees, the services are out-sourced. These “departments” are actually outside vendors; other independent businesses.
In a solopreneur event-planning business, once a client describes the type of event, the preferred geographic location, the number of anticipated attendees and the budget, the solopreneur swings into action arranging for a venue at which to host the event, accommodations for attendees (reserving a block of rooms at a special rate), catering, decor, entertainment, speakers, media (both social and otherwise), etc.; everything down to the floral arrangements on the tables. All from outside contractors.
The owner is, essentially, an aggregator, arranging and coordinating the various suppliers of the services needed.
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Is There a Problem?
My relative has no staff, no office, no client parking – no nothing but a phone, a logo, the proverbial robust Rolodex and a branded coffee mug.
One might think that the owner would need some help keeping herself coordinated and organized, but even that can be outsourced to a virtual assistant.
So, the problem is that, at first glance, the owner has nothing to sell. There are no assets to speak of. There may be several contracts in place but those are really one-time shots; business that has to be earned every year. But conceptually, this is little different than many other service businesses.
And although the owner in this case is a solopreneur – a single individual working from a desk at home – running a virtual business, the fact that she’s generating $1.5 million in revenue and $290,000 in discretionary earnings should suggest to anyone that there’s value here.
And there is. We just need to find it and determine who will pay for it. Both tasks are relatively easy.
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The Solution
The first issue – finding the value – is simple. Like any other business, the value to most financial buyers is based in the answer to the question, “How much will this business put in my pocket?” – the discretionary earnings.
The second issue is, who’s our buyer?
Well, there are two types and the decision to go after one or the other will depend on the current owner defining how quickly she wants to leave and whether she wants to wait around for a chance for a larger payday.
One logical buyer is another event planner. It could be a larger one looking to expand in the industry channels or geographic areas in which our business owner operates. It could also be a similarly-sized – or even smaller – event planner that wants to grow via acquisition. Both of these buyer types would be strategic buyers and, if the seller wanted to get out relatively quickly, this is the path to take (though the seller will have to stay involved for a transition period).
The second type of buyer is an individual that likes the solopreneur lifestyle; someone who wants the freedom the current owner has and understands the benefits of buying an existing profitable business rather than starting one from scratch.
Selling to this buyer would be gradual and will take time – ideally, several years as the buyer is integrated into the business. But this option would seem to be ideal for the woman I know. She wants to walk away in five years.
The buyer would, over time, become the “face” of the business; deal more and more with clients and vendors as the current owner gradually reduces her involvement.
The Bottom Line
Just because a business has no physical assets and the only employee is the owner doesn’t mean it won’t sell. Many such businesses make a lot of money – a fact that appeals to nearly ALL financial buyers.
And many such businesses are in niches that make them attractive to other players in that same or related niche. In the case of my relative’s business, it’s making a handsome amount of money every year, has proven to be sustainable (12 years running) and it has proven that it can be run virtually – and from anywhere; all significant pluses and all representing value.
Selling a “solopreneur business” is not unlike selling any other business. You start with the basics: know what the business is likely worth, identify the types of buyers the business is likely to appeal to and tailor you marketing accordingly. This ain’t rocket science, Bucko.
Like selling any other business, selling a solopreneur business takes planning and time. In the example above, selling to a strategic buyer is likely to be the quickest exit. But selling to a financial buyer – someone like herself – will likely be more financially rewarding. And the opportunity to mentor someone – and teach them your business from the ground up – is often its own reward.
If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe
Searching For…
This week one of the inquiries we received was from a U.S.-based company looking to acquire multiple route-based commercial landscape businesses in the Southeast and Midwest United States.
If any of you know of something that might fit, please let me know.
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The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at jo*@Wo*******************.com