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  • #982052
    Gmann
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    Hi All!

    Just found this forum, which is excellent for startups! Lots of useful info.

    I have a question regarding the sale of a sole trader business. I have been running a small web hosting business for several years now with a small but stable client base. As I have a full-time job plus other commitments, the small business has been more of a side-business and I haven’t really focused on growing the business (just keeping my existing clients happy). Anyway, the time has come to move on, sell the business and close this chapter.

    When I say sell the business, the most valuable asset would be “the clients”. I have posted an ad up and found plenty of interest from people wanting to buy the business, but one in particular was interested until I mentioned that it was a sole trader business, at which point he backed out saying he wasn’t sure if it’s even possible (legally) to sell a sole trader business as opposed to a Pty Ltd company.

    First question is: how true is this? am I only able to sell the client base but have to just cancel the business registration or can I transfer it to the buyer?

    Second question is: how do you put a price on the business given that there are no tangible assets? (only income forecast)

    Thanks in advance for any feedback.

    #1134557
    Wallscapes
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    Hi,

    dont take this as any legal advice only afaik sole trader is basically you. I dont think its a tangible thing you can sell.

    Only advice I could offer is maybe the first thing you could do is find someone compatible, someone that you think would look after your clients the way you do which makes them come back to you in the first place. Then maybe look at a finders fee or something of that type from each of the customers that you are able to refer on to that persons business.

    Cheers
    Dylan

    #1134558
    Greg_M
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    I can’t see any reason you can’t sell a business as an individual, many service businesses are sole traders (lawn mowing rounds come to mind), they seem to sell regularly.

    I’d say the big advantage of a P/L is it’s an entity in it’s own right, which has some advantages for packaging up a business as a bundle … for my money shifting away some personal asset risk is a big one too.

    If a business has a reliable cashflow for minimal input, I’d assume it’s saleable. How well it’s structured would be reflected in the price I’d say.

    Is there enough $ in the business to roll it into a P/L? If that’s going to make a difference selling.

    Can you sell it as a bundle to a bigger hosting concern at a discount maybe? That would get it off your plate without disturbing customers too much.

    I might be wrong, but I’d have thought a small hosting service would be a tough gig if you’re in the general market, there’s lots of very competitive services out there relying on volume at a low price, plus how much technical know how is needed to maintain the business? Unless you’re just a reseller, wouldn’t a buyer need to be a skilled server admin? They’re pretty thin on the ground atm.

    Good luck with shifting it, however you do it.

    #1134559
    victorng
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    It’s not an issue. You don’t need a company to sell your business. You’re selling the assets, which includes customers.

    Even if you had a company I can’t imagine a buyer would want to buy it (ans all of its liabilites etc) as opposed to just its assets.

    Cheers,
    Victor

    #1134560
    al.giffard
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    Hi Gmann,

    You sure can sell a business you operate as a sole trader.

    In selling the business, though, you’re only really selling the client base, and any other assets you use to generate your income, which might include your business name, website, domain, etc.

    As far as the business registrations are concerned, do you mean the ABN? An ABN always stays with the same entity, so as a sole trader, the ABN you have now will always be yours. You can’t transfer that, but nor do you have to.

    Once you’ve agreed to sell to someone, that person (or company, or however they have structured themselves for the business) will have to have an ABN of their own. You will organise with them to transfer your wholesale hosting arrangements (depending on whatever wholesale arrangements you’ve used), your domain, your website, your client records, etc., and your business name (assuming you’ve got a registered business name – which you can transfer).

    You will then organise for your existing clients to start paying the new owner, instead of you, for their hosting. It would be wise to get advice on your contractual obligations with your clients to ensure you can assign those obligations to another party, but that’s unlikely to present significant difficulties – it’s might just determine exactly how you go about this.

    Re your second question, there are a few valuation methods and the best one really depends on the specifics of your business. It would be hard to give any useful advice without knowing more, but check out this Business Victoria page for a good starting point: http://www.business.vic.gov.au/operating-a-business/how-to-start/buy-an-existing-business/valuation

    Hope that helps.

    Al.

    #1134561
    Anonymous
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    i’m in a similar situation – selling a small business which will consist of business name, domain name, website, phone number, clients.

    what do i do once i have a buyer – forms? ato? legals?

    thanks

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