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Ask HN: Selling my first company - need help with the process

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Re: Ask HN: Selling my first company - need help with the process

#41

Post by tlrobinson »

zackola wrote: post #8

Regarding pricing have you explored whether or not companies W, Y or Z might be interested in buying your product? Until you explore other buyers you are limiting the range of offers you may be able to get. By only entertaining what company X might buy this for you have already agreed to a price range which is $some amount of money that's an obscene deal for company X to $the maximum company X might be willing to pay…

Lawyers are important and well worth their cost... if the transaction goes through. You don't want to be in a situation where the deal fell through and the lawyer fees you owe are going to bankrupt you.

Assume the deal will fall through and plan accordingly, whether that's through a provision in the term sheet (like a cap on lawyer fees or a penalty for walking away from the deal), or working something out with your lawyer.

Related: deals do fall through.

Re: Ask HN: Selling my first company - need help with the process

#42

Post by brk »

inboulder wrote: post #10
kirse wrote: post #7

Earlier quoted context omitted.

the first person to say a number loses This is really just a myth. If you present a buyer with well-justified and thought-out reasons for your number, it's going to be hard for them to counter-offer with something ridiculous, unless they're just being an ass. Not to mention you should always have your base number in mind, at which point you just walk away. The OP also said the company has agreed with most of his init…

"This is really just a myth. If you present a buyer with well-justified and thought-out reasons for your number, it's going to be hard for them to counter-offer with something ridiculous, unless they're just being an ass" Wrong, you're missing the point entirely, I'd like to buy a business from you... The point is that if you offer a price first, this is the HIGHTEST the buyer will pay, he might have valued the busin…

The point is that if you offer a price first, this is the HIGHTEST the buyer will pay

This all depends on your negotiation skills and tactics. It is almost trivial to throw out a low-ish number and then build that up to something 2x or 5x that number after you've added on all the "extras".

While I'll concede that the prototypical hacker is probably not also a keen negotiator, I'll also say that you shouldn't get so caught up in absolutes when talking about something than is in the end more about emotion and personality than absolute value.

Re: Ask HN: Selling my first company - need help with the process

#43

Post by isnoteasy »

If company X is a big company, they know better than you the price there can pay for your product. So you need someone than can estimate that number, that is not what is the value of your product but what is the highest price they would pay for your product.

If you can't contact anybody to make this estimate, you should do it yourself but that requires to know a lot about the company that is going to buy your product.

Re: Ask HN: Selling my first company - need help with the process

#45

Post by Maro »

Assuming your product is software:

Per your description you haven't marketed your product yet, just built it. Since you seem to be on your own, I assume this is a 1-2 manyear effort. You'd be lucky if a company were to pay multi-million dollars for it, as they could just have somebody code it up for a tenth of the price. The exception is if you have some IP which they feel they need to purchase (unlikely) or time-to-market matters that much (I'd guess this is unlikely, because they'll usually need to integrate your stuff with their existing stuff, which takes extra time with outside codebase).

I'm saying be cautious, don't block your progress on this deal, and don't get your hopes up too high. There are no miracles, there is no free money.

I once spent months hammering out the details of a deal with a client (much smaller deal in the $10-100K range), both sides wrote several versions of contracts, they extensively tested the software, etc, and once everything was hammered out, negiotiations were over and everybody seemed happy (all that was missing were our signatures on the finalized contract) it turned out that the whole deal wasn't that important to them, and the deal died off for lack of interest on their part.

Re: Ask HN: Selling my first company - need help with the process

#46

Post by jaxn »

matwood wrote: post #18
jaxn wrote: post #9

Earlier quoted context omitted.

We had an application that was getting interest from a company that wanted to license the tech and add the product to their portfolio. I felt their licensing deal was convoluted and left too much room for us to get screwed. I then picked what I thought was a best-case kind of number and it ended up being so much higher than they were thinking that they didn't even want to counter. It is hard to recover from that. So…

It sounds like they may not have really wanted you to begin with and used your high number as their out. If they really wanted your tech/app/whatever they would have come back with something closer to what they wanted to pay.

That could be. I think it was more along the lines of they wanted us if they could get us cheap.

Re: Ask HN: Selling my first company - need help with the process

#47

Post by jkeera »

because of the early stage of your product without proven cash flows, it might be helpful to look at comparable transactions in your space or how the buyer (or its competitors) have bought other similar companies like yours. You might even want to look into hiring an investment banker that has represented companies like yours that have sold to larger companies, since they will probably have most relevant valuation figures.

Lastly, cash is king. Try to always get as much cash as you want, unless it is a really stable stock, i.e. Google/Apple.

In the end, get good counsel and it should be a market pricing sort of deal.

Re: Ask HN: Selling my first company - need help with the process

#48

Post by gte910h »

drewcrawford wrote: post #2

I've never been in your shoes, but one small tidbit I've learned about business in general is that the first person to say a number loses. If you can, try to get an offer out of them, and start negotiations there. The other rule of thumb I've seen acquirers use is (yearly revenue) * X, where X is some indicator of the risk of the business evaporating. Values of 0.9-1.6 for X seem pretty common for a product with litt…

>I've never been in your shoes, but one small tidbit I've learned about business in general is that the first person to say a number loses.

Naw, that's not true.

While they may be thinking in a much higher price range than you'd dare ask, alternatively, they may be thinking in a very low price range as well.

Whomever sets the first price suggestion frames the conversation. It depends how good you are at framing and how much gamble you have in you if you let them do it or you do it.

Re: Ask HN: Selling my first company - need help with the process

#49

Post by user2newyork »

SkyMarshal wrote: post #37
user2newyork wrote: post #29

Earlier quoted context omitted.

No I haven't released the product yet. Buyer has the revenue with a product which my product complements.

Can your product make money on its own, or only in conjunction with the company's complementary one?

Yes. it can make money on its own.
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