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I have been a full-time sole trader in the UK for 2.5 years. I build websites for both agencies and direct clients, and over these 2.5 years I have built up a good reputation, contacts and client base in my local area. The town I live in isn't huge, but many of my clients are nationwide.

My experience building websites stretches back 15 years post-degree, and I have led teams of developers on large projects in previous employed positions.

I have a possible opportunity to merge with a local agency, who I have been working with for some time. They are more established with a larger client base but they don't have in-house web skills.

My question is; how do I value my business in negotiations?

There are many nuances to this - would you simply value based on a multiple of annual revenue? Size of client base? Potential revenue from client base? How about valuing my skills as an individual? Good developers aren't easy to come by, not to mention all-rounders with project management and people management experience.

I'm not asking anyone to value my business of course, rather I'd like some pointers on how I value it. Does anyone have any experience of such a merging process?

  • I am not sure what you are asking. Will you merge as partners or you as an employee? – Peter MV Feb 26 '14 at 8:31
  • A simple solution might be to agree commissions on contracts landed from your clients, for each contract. You carry on doing what you do, with commissions coming in. This will deplete over time as the companies will almost, always negotiate behind your commission after a few times. – WillyWonka Apr 10 '14 at 22:31
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I don't have much experience with this but here's a few of my thoughts:

  1. Try and work out a figure in your head that you would be happy with
  2. I assume you have an accountant? they may be able to help you value the business based on a formula.

All of the nuances you raise above are exactly why companies are sometimes very hard to value - just look what happened with WhatsApp recently.

You may be able to get someone involved who is more experienced in order to broker a deal.

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Your real value to them is bringing in clients. That is not an easy thing to do. It's much harder than web development (as all the freelancers on here can probably tell you).

I'd view yourself as two pieces: 1. Sales Guy 2. Technical Guy

I recommend you think long and hard about which of these you want to do. This is a wonderful opportunity do both or shift back to Technical Guy or forward to more Sales.

Sales Guy

This is perpetual value and value they may be able to leverage better than you could on your own. I would view your current and future business as if you were a "rainmaker" or sales guy.

So, if you can bring with you $200K in billable time then what would a parnter of the company get for generating that much business? Or what would they pay for that?

In addition, I would also ask for a % (it might be small maybe 5%) of any future business from those clients. You might also ask to be their contact person. (This was a big deal when I was a consultant 15 years ago -whoever has the relationship with the client is viewed as the conduit to that business).

You're bringing them clients. That's a BIG deal, especially if they can do more for that client than you could by yourself. That's a win-win for everyone.

You could start (or become) the head of their "Web Development Department". Make sure you're ready for that. There can be a lot subtle politics you have to deal with in that sort of a position. BUT... you don't have to worry about your skills expiring: people skills will last as lon as there are people.

Technical Guy

I would treat your value as an employee seperately. I'd base my salary on that. That's just the going rate for someone with your skill.

  • This is a good answer, but I don't see how it connects with the original question? – Canadian Luke REINSTATE MONICA Mar 5 '14 at 16:50
  • He doesn't have a "business" per-say. He's a consultant who's bringing clients with him. It seems equivalent to a lawyer joining a law firm. So what he's bringing is "business" (accounts) not a "business". When he merges he will have not business - no capital, not guarantee recurring revenue, etc. – Clay Nichols Mar 6 '14 at 20:57
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I expect that your business has no value (apart from cash in the bank), as without you, it cannot generate income. Your repeat customers come back to you, not to your business.

So I think you are just asking what value you bring to them by working for them.

  • Hey Ian, are you saying you wouldn't factor in a client/customer list as an asset? Suppose the freelancer operated under a business name instead of his/her personal name? Would this change how you approach this problem? Thanks for participating. – jmort253 Apr 3 '14 at 3:24
  • @jmort253 No, as I expect that the clients will not remain when the one key member of staff left. If there were 5 members of staff and systems in place, so that when client make a request they did not know who would serve them, then it would be a different case. – Ian Ringrose Apr 3 '14 at 8:51

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