How Much is Small Software Business Worth?

One colleague of mine asked me a question – “I have a selling software product. How much is this software business worth?” I think I can give an advice.

A small software business can be owned and operated by one person: a developer, salesman, manager, and holder – all in one. This business could be run at home or in a small office. It does not require massive investments to grow up – only a computer, Internet connection, web site, and lots of hard work. Well, you have run it, you are working hard, designing your product, promoting your site, attracting customers – and one day you feel you are rich and tired. You wish to load off your mind and sell your business with potential to grow.

How much does it cost?

Let’s say, for simplicity – you have designed the software title; possess a well-known web site; have a stable income and no registered legal entity, patens, or licenses. You are not selling your permanent assets – computers, developments tools, telecommunications, and the like. You have no other staff but yourself.

Here is a simple estimation formula:

Business costs = (Month net income * Forecasting period) – Holder changing expenses

Month net income = Income – Tax rate – Overhead expenses – Development costs

For example:

You are selling the software for $4000 per month.
You are paying the 20% taxes.

Expenses are $250 per month for hosting, advertising, etc.

You are planning – your software will be selling for the next 3 months without additional design and development. So the development costs = $0, Forecasting period = 3 months.

If you do not have a registered trademark, patens, LLC – your Holder changing expenses and registration fees = $0. So, the buyer spends nothing for registration.

Let us strike a balance:

Month net income = ($4000 income – 20% tax rate – $250 month expenses – $0) = $2950 per month

Business cost = ($2950 * 3 planning months) – $0 = $8850.00

Now, you have the justification for your price.

However, you need a strong argument – why do you want to sell your small gold-mine?

Good luck!

How Much Is My Business Worth – Is This The Right Question To Ask?

One of the most frequent questions that I get from business owners is: “How much is my business worth?” Before we can answer that question there are other things that we must answer and do before we can get a complete and accurate answer.

First things first: If you have a desire to attract the most compatible, ready, willing and financially able business buyer, you must first present your business in the best possible light.

A few questions that you should ask first are:

Do I have a business that has been profitable for at the least 3 years?

Do I have verifiable tax returns and financial statements to show proof?

Anyone can start a business but it takes a very smart and capable person to turn it into a profitable business. As the owner of a business, can you be honest with yourself and say with 100% certainty, that you’ve been a successful and efficient business owner?

Another consideration and question to ask is: Have a prepared for the sale of my business by putting a stellar exit plan in place to provide for a orderly sale and transition?

If you own a business and you’ve not put your exit plan in plan, you’re causing a considerable decrease in value. If you attract a buyer that is ready, willing and ready to do things on your terms and your transition plan is chaotic, expect the buyer to want a discount on the finally selling price as a result of having to smooth out the “rough edges”.

Have you discussed in complete detail with your family about your desire to sell the business? Not doing so can cause headaches during to sell process and many business owners end up caving into the demands of their families and often times hinders the sale of the business.

You may be thinking “how do any of the above effect how much my business is worth”. The answer to that is– preparation. Preparation is going to answer the question: How much is my business worth.

Ideally you should start the process of getting your business prepared for sale about 2 years prior to putting it on the market for sale. The preparation that is involved will greatly affect how much your business is worth.

Many business owners do not take these things into consideration when they decide to sell their business and are extremely disappointed when the official appraisal is provided and the numbers don’t live up to their high expectations.

Every business owner has the right to believe their business is worth a certain amount but the reality is, did you prepare? Be honest with yourself.

If you did not prepare you could be in for a disappointment in the event that you need to sell immediately.

Before asking “How much is my business worth?”, read the above, let it sink in and if you’re in need of any help get in touch and I am sure I can help you put a plan in action.

Is a Dropship Business Worth It?

I’ve heard a lot of horror stories about dropshipping and it made me do more research about it. You see, the most common reason why people fail in this kind of business is that they fail to prepare on one of the important aspects of it. As with any business, preparation is critical and making sure that even those simple steps are taken cared of will mean the success of your business.

I visited a forum the other day and there was one guy who said his dropship business failed and he is not recommending the business model ever. He said it’s a bad business to get in to and you’ll lose money on it, no questions asked.

So I sent him a message asking him about what happened and how a supposedly good business model failed him. It turned out that he was partnered with a lousy dropshipper and he was not prepared enough to answer customer service questions. You see, with a dropship business, you still have to take care of your customers, it’s not a set and forget thing that will make you money even while you sleep.

Dropshipping is a real business with real customer interaction and real hands on experience. Of course, minus the inventory and physical stuff but all the other business aspects are still there.

During our conversation I was leading him to think about what happened and to re-assess everything and think who really is to blame about his failure. In the end, he said, you’re probably right, the business model was not the problem, I’ve always thought a dropship business would make rich, and it was me who screwed up. I’m not sure but after our conversation, I’m thinking he’s out there setting up a dropship business all over again.

So in my opinion, any business, be it a dropship business, an affiliate marketing business, or even a good old brick and mortar business is well worth it if you prepare well and you’re ready to take on the challenge. Go for it full blast, with all your heart and all your might and I’m sure everything will be perfect.