51–60 of 98 posts
Earlier quoted context omitted.
Because 37 Signals is more popular than you are.
So if 37 Signals is more popular than you, what value there in paying $480,000 for a site whose customers may not be interested in it after 37 Signals leaves?
1. Site code - Sure you are getting a head start since you don't need to build from scratch but the site doesn't do anything special that can't be duplicated.
2. Brand Name - I think it's more about 37signals being behind this rather than Sortfolio being an awesome product. I don't know how many customers are going to actually use this when 37signals drops it.
3. Customers - See point 2. Why do I need to be a customer of just another portfolio site?
4. Design - Any good designer can reproduce this or create something completely new for you.
5. Steady Cash Flow - I can't even believe they mentioned this as a selling point. Steady cash flow AFTER you integrate your own billing solution.
I would be very interested to see someone estimate out the cost of just cloning this/hosting/advertising. I feel like for less than the purchase price you may get more value and then you just advertise directly to their market.
37signals is pricing this deal with the assumption that there will be a significant (>50%) departure of customers upon the deal closing, that cash flow growth thereafter will be meagre ( If we assume a $480 000 purchase price, annual cash flows of $212 277 (12 times the mean monthly, which is fairly normally distributed save for March 2012) growing at 2% a year, and abandonment after 7 years the investment yields ove…
the investment will generate a 10% yield after 7 years. Except 7 years ago the most popular social network was called MySpace. The iPhone, Twitter and ycombinator did not exist (amongst other things). Rails 1.0 was released that year. Why would a niche job board, detached from the brand name that was its only asset, prevail through 7 more years of internet time?
Let's constrict the time frame to 3 years from purchase and continue the abandonment assumption. Assuming 2% annual cash flow growth we cannot sustain more than an 11% initial crash before yield falls below 10%. With -5% annual cash flow growth this number drops to 4%. The investment is probably not reasonably viable with a 3 year time-frame.
Note that a more nuanced analysis would ask for a more rigorously thought out required rate of return (in this latter case 10%).
Does the haystack.com domain come with it?
Earlier quoted context omitted.
the investment will generate a 10% yield after 7 years. Except 7 years ago the most popular social network was called MySpace. The iPhone, Twitter and ycombinator did not exist (amongst other things). Rails 1.0 was released that year. Why would a niche job board, detached from the brand name that was its only asset, prevail through 7 more years of internet time?
Fair point, 37signals may also expect the whole thing to organically fizzle out within a few years (updated). Let's constrict the time frame to 3 years from purchase and continue the abandonment assumption. Assuming 2% annual cash flow growth we cannot sustain more than an 11% initial crash before yield falls below 10%. With -5% annual cash flow growth this number drops to 4%. The investment is probably not reasonabl…
Is there a reason you are not going with a domain marketplace to sell this (eg: Sedo, Flippa)? I feel like posting on such sites would get it the exposure it needs to be sold.
If it passively generates $200k /yr with no maintenance, what reason is there to sell?
If they aren't focused on it, it is a distraction and can potentially tarnish the brand. Plus, they aren't going to sell for nothing, so they get immediate capital they can invest in areas where they expect a higher rate of return.
I don't believe for a moment he will shut down $200,000 profit with little maintenance. It's condescending to suggest "I want it to go to a nice home but I'll close it down if I don't get x." If you're willing to entertain such thought then you do not truly value the user.
Believe it. Sortfolio isn't right for us anymore. Our attention is elsewhere. If we can sell it for a fair price (we consider $480,000 fair), then we'll sell it. If not, we'll close it down and move on. There's nothing condescending about that.
Earlier quoted context omitted.
Fair point, 37signals may also expect the whole thing to organically fizzle out within a few years (updated). Let's constrict the time frame to 3 years from purchase and continue the abandonment assumption. Assuming 2% annual cash flow growth we cannot sustain more than an 11% initial crash before yield falls below 10%. With -5% annual cash flow growth this number drops to 4%. The investment is probably not reasonabl…
I think a smart businessperson could blow it up much bigger. Open it up to a variety of different industries. Wedding planners, photographers, florists, interior designers, architects, etc. Think big.
Assuming the buyer cannot significantly mitigate any loss of customers resulting from the sale, I looked at the interaction between that crash and expected return. I assumed lower growth rates in my analysis based on the low growth and deviance in the historic cash flow data.
If a buyer got hit with a 1/3 initial crash but believed they could growth cash flows thereafter by at least 10% per year for 5-7 years they could expect an internal return of 21% to 30%, independent of the capital gain on the larger, growing company at the end of the road. The game naturally changes if one ignites such non-linear growth.
Earlier quoted context omitted.
Fair point, 37signals may also expect the whole thing to organically fizzle out within a few years (updated). Let's constrict the time frame to 3 years from purchase and continue the abandonment assumption. Assuming 2% annual cash flow growth we cannot sustain more than an 11% initial crash before yield falls below 10%. With -5% annual cash flow growth this number drops to 4%. The investment is probably not reasonabl…
I think a smart businessperson could blow it up much bigger. Open it up to a variety of different industries. Wedding planners, photographers, florists, interior designers, architects, etc. Think big.
Furthermore, even if they knew who 37signals was - that brand is removed from the product after the sale.
Alternatively, if you seriously believe the success of your job board is due to technical excellence and would map to other markets. Why would someone buy the tech for half a million dollars instead of replicating it within a few months for under 100k dollars? Using the very same tech staff that he will need anyway to operate it?