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A $500k business would mean you'll end paying on average between $3-5 million for it. May I ask your rationale behind chasing these deals? Why not split the $3-5 million into risk-based chunks and invest in startups instead? You only need 1 of them to hit 50x.
The $500k/year business does, conservatively, cost $2-3 million (using the common "5x the yearly revenue" formula).
I think this is going to be important now and in the future. Systems are getting so complex nobody can build something complete from scratch. I see people making high quality components and then merging or being acquired to create a whole end user product. Prior to that point, you'd have something that's not very profitable unless lots of companies license your component and do integration themselves.
(I think the advantage this approach has over the one you've suggested is that the product is always capable of making money even from the very beginning, just on a smaller scale at first. I think this is a critical feedback mechanism so that folks know whether what they're developing is actually useful to folks.)
Earlier quoted context omitted.
I'll write about this more in the near future -- don't want to step on a Starfighter announcement coming up though.
The talk wasn't recorded, was it?
I sold Bingo Card Creator through FEI ( http://feinternational.com ) and have nothing but good things to say about them. Something like 20% of their listings are SaaS businesses. The going rate for a SaaS business is roughly 3X yearly SDC ("seller discretionary cashflow" -- revenue minus costs required to run the business as opposed to e.g. the owner's salary, distributions, interest expense, etc). It is closer to 2X…
http://www.startupsfortherestofus.com/episodes/episode-197-h...
(Caveat: the size of the business you're looking for is on the lower end of the deals on Axial)
This strikes me as one of those 'if you have to ask, you shouldn't do it' situations.
A $500k business would mean you'll end paying on average between $3-5 million for it. May I ask your rationale behind chasing these deals? Why not split the $3-5 million into risk-based chunks and invest in startups instead? You only need 1 of them to hit 50x.
I've thought about selling my side business, but I want to sell it to the right person. I'm in Austin. Lemme know if you want to meet. My email is HN username + gmail.