Retiring from youth sports photo busines

I plan on retiring in the next two years from my 30+ years in youth sports photography on the central coast of

California.

I have an established business, with about 50 contracts, (regular dates) with local sports, gymnastics, dance, schools, and organizations. Although I run the business from my home the growth potential is excellent. We are strickly on site photographers (no retail studio). The business has a gross profit of approximately $70K per year.

What would a business like this be worth? (contacts, accounts, web site, email, supplies etc.) I run this business full time, but it could be done as a part time business. Granted it is a small business, but with some work it could easily grow. Is this business worth selling? Or should I sell the contacts to another photographer? Or possibly to one of my competitors? What do you think its worth? Of course my current customers would have the option using the new owners, or not.

Any opinions?

Thank you

BA

Good luck, finding a qualified buyer.

I have no direct experience with selling a photography business, but I've bought and sold several insurance agencies, selling both casualty and life. I've also sold an accounting practice.

With insurance, you tend to work with one-year and six month contracts. The buyer can cancel at any time, but there tends to be some "stickiness", where customers don't move because of the annoyance of going through the process again. If everyone is happy, then momentum to change is low. With insurance, we pay/receive a one or two-time multiple of the gross. The assumption is that the acquired business is being added into an existing business and there will be economies of scale. Also, the insurance companies are doing most of the work.

With professional services, such as yours, performance by the buyer is paramount. When buying and selling accounting practices, there are no long-term contracts, but customers tend to stay, because of the pain of moving. You've got that going for you. Dentist and doctor practices have the same stickiness, but customers will abandon quickly, en mass, if there are customer service issues, or concerns about quality. Until you have all of your money, you share the performance risk.

The best buyers tend to be those already in the business, looking to grow. They can pay top dollar, because they know how to perform. Selling to a newbie, is a lot of risk to both the buyer and you. Since you have a two-year horizon, you might work with someone, over a period of months, then have them slide in a primary chair, as you slide out. Collect your money as close to the front as possible.

Maybe in the USA the terminology is different for Profit and Loss Statements than what is used in AUS?

A business with a Gross Profit (Total Sales minus Cost of goods sold) of $70,000 would reckon to me as Nil or Negative for the Valuation for Sale of the business; and this Valuation is after considering all Assets including the Goodwill Asset (customer loyalty and relations; brand recognition; customer lists; reputation etc.) and basically the Goodwill Asset seems the major consideration for the sale of your business.

I expect that you would have not much as Minor Assets (Cameras etc) and no Capital Assets (Buildings etc) and very little Stock at hand (Prints yet sold etc)?

(Here) in a Profit & Loss Statement, the Net Profit (Gross Profit minus Expenses) is the more important number I would consider.

In the business described, from the 70K Gross Profit one would have to minus all expenses. The major expense in a one operator small service business is Salary. Then: Insurance, Accounting, and day to day overheads like petrol electricity etc.

That means the Salary for the one person operator is less than $70,000 p.a.which basically means paying any money for the business as described is like buying a underpaid job, and that is provided all the existing Clients stick.

But that's my point of view acting as potential buyer: other prospective buyers will see things differently and as the seller you should price it to what the market will tolerate.

Good luck.

WW

WW, the Australian understanding of Gross Profit and Net Income are at one and the same with the US understanding, according to this former CPA.

Buying and selling, the multiple paid changes, depending on whether you're talking about Revenue, Gross Profit or Net Income. The price based on Net Income, will be in a range from five to fifteen times, depending on growth, momentum and a number of other factors. Prices based on Revenue, will generally range from a one to a two-multiple. In a business with exceeding low gross margins, then you'd probably start with Gross Profit and apply a pretty low multiple, like a one.

If there are significant assets (I'm doubtful), then you'd add that net value to the multiple paid for the customer base.

Thank you David for the corroboration re terminology.

Re buying and selling a business, as I said, mine is my opinion as a prospective buyer of the business described: yet I also agree with you that the OP probably has a better chance getting some reasonable money by selling to someone already in the game who is looking to expand.

WW

dcstep gives great advice. A rough idea is that businesses in some (industrial) sectors sell for 1x annual revenue or 8x annual cash flow.

To achieve $70k in gross profit as you describe it, what is your sales revenue?

By using the term "gross profit" do you mean "taxable income". What did you list on your federal tax return as income related to the photography business?

These factors weigh strongly on the valuation.

Selling the client list/contracts piecemeal to existing photographers is probably the way to highest transaction value, and probably also the longest time and most effort to sell the business.