Selling a business is a useful way to cash out a venture that you’ve been diligently working on for a few years or even decades. Whether you’re a partner with a minority stake or selling out a company in its entirety to retire early, selling a going concern is an excellent way to feather the nest as you lose your main source of active income.
Post-sale, the proceeds become passive income as they can be invested into a broad collection of businesses, debt financing through corporate bonds and other investments that can deliver an income or capital gains to live off over the coming years.
In this article, we talk about what type of businesses can be sold and where there’s an established path to doing so, how to go about it.
Selling a Virtual Business
A newer kind of business to put up for sale is a virtual business. This might be a niche website, an Amazon FBA business, a SaaS or an e-commerce website.
The beauty of virtual businesses is that they’re now readily marketable through brokers like Flippa.com, EF International, and Empire Flippers. The prices of these digital assets are rising as the multiple of monthly net income grows with their increasing attraction. This makes these assets worth holding onto rather than selling off cheap.
Currently, websites sell for 1-4 years of income depending on their size. An Amazon FBA venture (where the owner imports goods from a factory and then sells them on Amazon.co.uk or other related sites) and SaaS (online website applications) sell for 3-4 years of net income.
Selling an Independent Financial Advisor Business
As an independent financial advisor (IFA), it can take years to build up substantial funds under management (FUM) and regular income from the fees and commission received through managing clients’ investments.
It’s difficult to know how to exit this business if you wish to move away from it or sell the practice for a profit. Fortunately, there’s a website (Retiring IFA) that helps connect sellers with other IFAs looking to build up their client list and FUM by acquiring a“client bank”. The multiples vary depending on the transaction size, but a 3-year multiple of the annual fund fees/commissions is not uncommon. Usually, if the business is sold, then it’s treated as an asset sale with goodwill included.
Selling Commercial Parking Spaces
Commercial parking spaces in vibrant city centres or major airports throughout the UK can be invested in through a company and later sold to other business. These kinds of investments tend to be zero-hassle ones where the rent from the parking spaces goes through a centralised parking spaces rental service.
By purchasing a collection of parking spaces through a company, it can turn into a real asset-based business providing regular income. The expected yield on a parking space is around 7-8 percent in some cases, but this varies depending on location, capacity and other aspects affecting vehicle flow. This makes it competitive for other companies that already own property as a business investment.
Fortunately, many different kinds of businesses can be sold in the UK. There are now great opportunities to cash out of non-public assets and diversify when needed.
