Selling my online business

[HennaDancer]

I used to have a terrific online retail art supply business. It was really humming, getting several hundred dollars a month with little effort, and growing fast. Then I got pregnant and something clicked my body chemistry over into chronic depression, plus my beautiful three year old turned autistic, and I haven't been able to work the business well since. I'm just not able to keep up with orders and get them out in a timely manner. I restricted the business to wholesale only and still wasn't able to give good enough service.
I have import contacts for a product that is equal or superior to all other types of the same product currently available. I have researched the best suppliers at the best prices for all materials relevant to the business, some of which give me costs less than 10% of the average sale price seen commonly on other sites. All that it would take for someone to make this a success is to be able to pay attention to it. One of the buyers who has stuck by me through all my issues is interested in buying/taking over the business.
How do I proceed? Basically, I'm selling not so much stuff, but the information on how to find the best products, and my referral. I'm pretty well known as an artist, so my recommendation would mean a great deal as the buyer would get not just the people who already buy from me but also all the people who visit my site and can't buy because they want smaller amounts, plus the recommendations I would give whenever I teach, which is frequently. The amount I've made in cash in the last couple of years is nothing compared to what I could and should have made, and what the buyer certainly can and will make.
Another issue is that I will continue to need supplies, and will go from seller to buyer. Is that a factor?
How do I figure out what's fair?
Thanks!

[Bolt the Nut]

One typical method is to calculate a value based on future expected earnings (where earnings are how much of your sales revenue is left after all your bills and suppliers are paid). For example, suppose you expect earnings of $10,000 a year for the next ten years. To calculate the business value, you have to discount the future earnings (as a dollar in the future is not as good as a dollar today – kind of like reverse interest). So, next year the earnings are worth say $10,000 x 95%, and the year after that they are worth $10,000 x 90%, etc. Add it all up and you would get a value, in today’s dollars, of $72,500.

Of course, the new owner will have do some work in order to get this money, so an adjustment will have to be made to account for the value of their time. If the new owner has to put in 500 hours a year to run the business, and they could be earning $10/hr at another job, then they should deduct a “salary expense” of $5,000 from the $10,000 annual income. Thus, the business would only be worth $36,250 to them. (If you are selling inventory with the business, its value should also be added to the sale price.)

There are a lot of additional considerations (try Googling “small business valuation”), but hopefully this will get you started.

One other thought – it sounds as if your ongoing involvement is quite important to the business. This can complicate the valuation, and the business may not be worth as much in someone else’s hands. Have you considered hiring help to perform the time-consuming but mundane tasks, such as packing and mailing orders? That might be a better solution.