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Ask HN: Where can I buy real software companies?

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Re: Ask HN: Where can I buy real software companies?

#81

Post by pcunite »

72deluxe wrote: post #69
pcunite wrote: post #47

I would like to sell my business. You'll need to know C++ and care about the Windows desktop market. I get about 8K downloads every month. I want $225K which is 5x revenue. I don't know if I'm entirely serious. It just makes money and I don't work it properly. It should make $90K-$110K if someone cared about it.

I know C++ and care about the Windows desktop market but don't have that money. Out of interest, what software is it? What sort of market? Do you need assistance or another developer?

email me, look at my profile.

Re: Ask HN: Where can I buy real software companies?

#82

Post by mathattack »

patio11 wrote: post #8

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…

This # sounds very low. Generally public companies sell for many times this. Is this because so much of the equity in side projects is tied up in the owner? Or that there isn't growth? I frequently see software firms selling for 8 times revenue.

With interest rates so low, it seems like businesses with recurring revenue that can recoup their costs in 3 years are a steal.

Re: Ask HN: Where can I buy real software companies?

#83

Post by nedwin »

mathattack wrote: post #82
patio11 wrote: post #8

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…

This # sounds very low. Generally public companies sell for many times this. Is this because so much of the equity in side projects is tied up in the owner? Or that there isn't growth? I frequently see software firms selling for 8 times revenue. With interest rates so low, it seems like businesses with recurring revenue that can recoup their costs in 3 years are a steal.

Stock in a public company is far more liquid. A larger software company is also likely to have employees, big clients etc.

If you're looking to sell and walk away from a founder-run SAAS startup 3x is about right.

Add multiples if you have employees, long term contracts, significant market share etc etc.

Re: Ask HN: Where can I buy real software companies?

#86

Post by derefr »

jacquesm wrote: post #72
bostonpete wrote: post #70

Earlier quoted context omitted.

I would think it protects the company just as much. I've never sold a company but I'd imagine that people often don't want their customers and/or employees knowing that they're shopping the company around. Requiring an NDA before the company name is shared presumably makes it significantly less likely that word will spread in undesired ways...

It's quite hard to gain traction on a corporate sale and you're right that keeping the customers and the consumers in the dark is 'par for the course', but to withhold the name of the company from an interested party serves only one goal. Think about it: I have this company for sale but I won't tell you which one it is until you sign this document. What's is there to lose for the company to have its name spread to th…

And journalists wouldn't pretend to be interested in purchasing companies just to get a scoop?

Re: Ask HN: Where can I buy real software companies?

#87

Post by pmrd »

bluedevil2k wrote: post #11
pmrd wrote: post #6

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 don't think that multiple is right - for a $500k rev software company, I wouldn't pay any more than 3x.

Revenue is largely a function of marketing effectiveness/marketing spend coupled with a minimum product/market fit. If someone has a legit internet software product bringing in $500k a year, they'd have to be pretty silly to sell it for $1.5M - unless they're really desperate for cash or hit a scale/product/market/ops ceiling they cant crack.

Capital is free flowing at the moment and a legit revenue-generating, valuable, scalable business shouldn't have to cash out this early or this low.

Re: Ask HN: Where can I buy real software companies?

#88

Post by tsotha »

gohrt wrote: post #44

Why are the answers here so coy? "Send me an email, we'll talk" Is it a secret to be shopping your website/product to a new management? Why?

Would you enter a contract with a small business when you knew the sole proprietor was actively looking for a buyer?

Re: Ask HN: Where can I buy real software companies?

#90

Post by lsc »

imaginenore wrote: post #56
codegeek wrote: post #49

Earlier quoted context omitted.

Could just be me but it feels like feinternational always show a very inflated price. 3x seems too much specially for companies that are barely 1 year old. Also, it is extremely difficult to sign an NDA just to inquire more about a sale as feinternational does not give any details upfront. Totally understandable that the company in question wants to maintain its privacy, secrets etc but this is a difficult situation.…

3x doesn't seem bad at all. It's like an investment that generates 33.3% annually. After 3 years it's all free money.

It's counting the founder's salary as profit. In these small businesses? founders usually have to do a good bit of work. what do they say? you are buying yourself a job?

if you're making 33.3% of $50k-$500K per year... the very top end of that is close to what you'd get working for someone else, and usually you don't have to put down a half million to get those jobs.

So, while I don't think I'd sell you my company for 3x SDC, I completely don't blame you for wanting to pay less than that. It'd really only make sense if you were sure that I had things setup to the point where I didn't have to do any work (which is something I can deceive myself about... I don't see how you could get a solid answer out of someone who had an interest in deceiving you.)

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