How much should they buy me out for?

Philip J. Fry

Philip J. Fry

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Hey ya'll. So, the other day, the guy who owns 70% of the company visited me. At lunch, he discussed how he's tired of paying me 10% of SE revenue. Before I was their SEO guy, the company was making $30,000/month in SE Revenue. I told them that, if they give me 10% of new SE sales, I'll grow their company to astronomical proportions. I did and that was 5 years ago. In 2019, we were at $5,000,000/year in SE revenue. My cut of that is $500,000. In 2021, we're at 2.5 million USD since COVID hit us pretty hard. We're past the 50% in recovery mark already and are close to getting to 100% recovered. Yeah!

I thought about it and am OK with him buying me out of the profit share. I might want to wait until next year so that the company is recovered but it'll be a multiple of the yearly profit share payout. How much should it be? I see that EmpireFlippers has 47x monthly revenue, which is 4x yearly. Is this good? It'll be 1 million, which I think is quite low. I was hoping for 2.5 million.

Anyone has any idea? How much would you exit for?
 
How was 2020? Was it really low because of covid19?
How much do you project you will make in 2022? Based on 2021 numbers, probably ~$400K?
You're right about the EF multiples, but you also have to consider that you lose a commission there, so you would get only ~40-42x.

My idea was the same as yours even before you mentioned EF. Sell based on ~40x multiple.
If you will close this year at around $300K and you think next year you will make like $400K, I would try to get $1.2-1.4 million to exit. I would ask for $1.5 million at least and negotiate from there.
If I was you I would take the money and run. There are no guarantees in SEO.
There's no way you can't build up something great again with that kind of money.

Disclaimer: My highest site sale was only 6 figures yet.
 
If its the site I think it is, take cash, don't offer terms or multi year financing.

You can have a lawyer work out what a structured settlement would look like based on the size of your claim.

Website valuations and empire flippas have nothing to do with this.

Also plz write a guide on how to negotiate 10 percent royalties on organic revenue.
Thats like the poshest deal I've ever heard of. Nice job.
 
I have no clue, but I hope you get as much as possible.

I'm not sure you can use the multipliers for a website, as that's selling the entire "system" and you're only a part of the system so to speak, even if a big part of the system (damn good job).

Maybe you can argue that the buyout should be based on an average of pre- and post-covid instead of the past 12 months.

Which would mean 3.750.000 USD as the base yearly revenue (5 + 2.5 / 2).

37500000 / 12 * 0,1 * x which in the case of a 36 month multiplier would be 1.125.000 or with a 48x multiplier would be 1.500.000.

So I would say those $1.500.000 mentioned above as well, seems like a fairly reasonable starting position and then perhaps settle for 1.3 million, which also seems to be an amount that would allow you a good lifestyle and investment opportunity.

If you wanted to get fancy, you could add an Earnout clause and stay on as an employee for 12 more months to try to fix it.
 
I placed an ask for $2,500,000. The guy with 70% balked and said he'll get back to me later. He now says he'll meet with the guy who has 30% to figure something out. I really don't want to work here anymore and exiting wasn't even on my mind until he brought it up. Now that we're discussing it, he's having cold feet. This is so typical for these guys.
 
Maybe I’m missing some context but I think Ur nuts if you actually just did that.
That’s a slap on the face way to start.

Deals like this are not based on the hostage value. That’s a put them out of business and leave them with a risky asset and payment plan kinda offer.

If you had retained me to represent you I would start at between 1-2mill offer and negotiate based on financing timeline and risk exposure. 900k all cash right now 1-2 million if they want time to pay you out over several years to reflect the risks and timeline.

Good luck with the negotiation.
Curious how well it will work out for you.
 
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secretagentdad said:
Maybe I’m missing some context but I think Ur nuts if you actually just did that.
That’s a slap on the face way to start.

Deals like this are not based on the hostage value. That’s a put them out of business and leave them with a risky asset and payment plan kinda offer.

If you had retained me to represent you I would start at between 1-2mill offer and negotiate based on financing timeline and risk exposure. 900k all cash right now 1-2 million if they want time to pay you out over several years to reflect the risks and timeline.

Good luck with the negotiation.
Curious how well it will work out for you.
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I signed a non-compete and it says that there needs to be a clear severance once I'm out. The non-competition period, where I work for no company in the industry, is for 1 year. I don't want to do a financing and stay around to help because of that, plus I want the cash.

Today, the guy with 70% asks me to continue working in the meantime. I was already packing my bags when he said that... I don't feel like working anymore. Taking 2.5 million, investing it in a portfolio of real estate, stocks, bonds, and crypto would be good. Then I'm off in the sunset traveling.
 
May I ask you in which niche the company works?
And how did the deal with the 10% come about?
I find it hard to take on a client and get paid for SEO purely with profit sharing.
Had you different Clients with profit sharing?

I had so far only experience with monthly retainers and clients that paid late.
 
@secretagentdad and @Nobody , I was working for them for 1.5 years or so on retainer. I've re-negotiated the retainer many times with performance and basically told them I won't work with them anymore unless we do a profit share. At that point, their company went up 3x or so; so, the owner agreed just out of "let's see what happens." Then the company went up 10x and that's how we got to today. The key is finding people who are ambitious, educated, and knowledgable. You can't expect a close minded person who runs a... let's say, home painting company, to do such a thing. Well, maybe you can. IDK. But, by that time, they knew I can deliver results and I wasn't willing to put in that much effort, unless I got a revenue share.

Also, I did resolve the thing with my company. They're brining me and my team in-house for a fix salary for 5 years. I earn mid-six figures now and my pay is guaranteed for 5 years. Pretty good terms IMO!
 
Congratulations.
Sounds like a rather tense negotiation.
Hope it all works out for you. 5 year contract is a really big commitment.
Surprised they were ready to risk pissing you off so much only to lock you in like that lol.
 
secretagentdad said:
Congratulations.
Sounds like a rather tense negotiation.
Hope it all works out for you. 5 year contract is a really big commitment.
Surprised they were ready to risk pissing you off so much only to lock you in like that lol.
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Well, I did bend them over the barrel to get them to agree to a 10% revenue share. They hated that but we’re ok with it when we quadrupled in sales and had to hire a whole new fulfillment office. The deal with them is good for them since I get 50k raises a year. As long as growth is half a million or more a year, they make our better than paying me 10% revenue share. I in return get security. They can’t re negotiate for 5 years and I know exactly my salary. Pluses and minuses for both sides but we both agreed to it. Oh, they also pay out my revenue share too, which is 200k in cash upon signing the new contract and I go on vacation for the rest of the year already booked my flight to Europe. Happy holidays.
 
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