What is a very small business
What is a very small business?
Very small businesses are a specific subset of the small business world, and they are their own unique category. It’s a category that often gets overlooked or overshadowed by much bigger small businesses. Very Small Businesses, or VSBs, earn less than $2M per year in revenue and less than $500K per year in profits (often a lot less). VBS can have employees or be owner operated. If they have employees, the majority of them work part-time. All VSBs have some owner involvement, but the role of the owner varies considerably. Very small businesses usually have one location, but they could have two or three. The location could be a storefront, office, retail space, a website, or a mobile unit (a van or truck, for example). When very small businesses sell, the sale price can be anywhere from $10,000 to $750,000, though a more typical sale would be in the $50,000–$350,000 range (and there are many very small businesses that sell for even lower amounts).
Very small businesses can be any type of business. They can sell products or services. They can be hair salons, yoga studios, boutique fitness, Pilates studios, Etsy stores, cleaning companies, surf schools or anything else. They can be full time businesses or side hustles.
How do I know if I have a very small business?
If you own a very small business, you understand that we’re talking about you. You know you are in this category if you sometimes read articles for small businesses and think to yourself, “oh, wow, this does not apply to me at all. My business is nowhere near that size.” Similarly, you may have experienced a scenario where you’ve inquired about a product or service for your small business only to find that the proposed solution felt like “too much” or way more than you needed for your business. You’ve experienced this in hundreds of different ways during your business ownership— dealing with a bank, landlord, credit card company, or supplier— and you probably felt that they just didn’t “get” you or understand the size and scope of your business.
Why does it matter if I have a Very Small Business when I’m going to sell it?
Very small businesses are less complex than bigger small businesses. They have defined business models and relatively clean-cut operations. They make less money than larger small businesses. Practically, that has major implications when it’s time to sell your business for three main reasons. First, your very small business is relatively straightforward, which means that your business has a story that is not too difficult to understand. You or a trusted broker can convey that story to potential buyers. Second, it means your valuation is also easier to calculate. It also means your business will not command as high of a value as a big business. Third, it also means that traditional brokerage services may not be scalable to your business size – the cost to sell might be prohibitive. You will need a selling approach that is right sized to your business.
When it comes time to think about selling your California based small business, reach out to us, even if your sale is years away. We love to network and enjoy meeting small business owners everywhere, but especially in Orange, Los Angeles, San Diego and Riverside counties.