BUYING A SMALL BUSINESS

Business for Sale: Business-to-Business Web Site

Dying to get in on the Web frenzy? Consider this already-profitable business-to-business Web site. Profile includes price, how the business was valued, outlook of prospects, and pros and cons.
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The Business: Looking to link up to your own Internet deal? Consider this already-profitable three-year-old commercial Web site with a focus on the international import-export market, plenty of electronic traffic (currently about 350,000 hits each month), and all kinds of business-to-business growth opportunities. About 80% of its revenues come from corporate subscribers, who pay annual fees ranging from $244 to $324 for unlimited access to postings (most supplied by the subscribers themselves) about international-trade opportunities, financing options, and the like. Its current chief--who works alone and serves as Webmaster, customer-service representative, and advertising salesman--wants to concentrate on other business holdings. The good news? His Web site, now based in Maryland, can be relocated anywhere (including a new owner's basement) that's equipped with a computer and an Internet connection.

Price: $229,000

Outlook: Yahoo! As we move into the new global economy, this company's prospects could be nearly as limitless as, well, cyberspace. After all, a new growth-oriented owner could push the "on" button by hiring a sales force to woo new business customers (or, better still, to add big-name advertisers to the current roster of three). Other options include boosting the company's activities as a reseller of international-trade software, which currently provide 2% of sales. The site faces competition, which makes raising fees for its subscribers a no-no. But a new owner can count on great Web-site-name recognition; a fairly robust base of 2,000 active subscribers; and an information-swapping relationship with an international-trade publication, which provides valuable publicity at no cost.

Price Rationale: In a market this hot, anyone who claims there are rational rules of thumb is probably just keeping his or her fingers crossed. Everyone is on the prowl for established Web sites--especially the small handful that, like this one, have a proven record of actually making money. So even though this company has no assets worth mentioning except the owner's computer and a subscriber list, prospective buyers should be prepared to ante up, especially if a bidding war develops. At about three times recast earnings, the current price is well within the recent sales pattern for companies of this size and geographical base. However, the business's broker confides that his last Internet-related sale was priced at $650,000 but went for more than $1 million.

Pros: Bookmark this deal! How could anyone lose on a business bet that combines the growth prospects of the Internet with those of the global marketplace?

Cons: If this company gets priced too high in the E-stratosphere, you may find yourself wishing you had more assets and fewer competitors.

FINANCIALS
  Gross Revenues Recast Earnings*
1996** $14,580 $13,080
1997 $118,870 $78,260
1998 $122,520 $75,740

*Before interest, taxes, depreciation, and owner's compensation.
**Results from partial year of operation, July 25 through December 31.

Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Al Horvath or Marc Dosik at VR Business Brokers, 410-772-0006.

Last updated: Oct 1, 1999




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