3 ms·
How exactly is $2B * (0.1 * 5% + 1) == $10B? I genuinely want to understand your valuation formula.
by andruby 10y ago
How exactly is $2B * (0.1 * 5% + 1) == $10B? I genuinely want to understand your valuation formula.
- baccheion 10y agohttps://news.ycombinator.com/item?id=12651012 https://news.ycombinator.com/item?id=12651012 According to the poster, the growth rate is 20% not 5%. Either way, to ball park acquisition price, you can divide growth rate by 10, add 1, then multiply in yearly revenue ((growth% / 10 + 1) * revenue). You can also divide growth rate by 10, double it, then multiply in yearly revenue ((growth% / 10 * 2) * revenue). Those estimates assume profit margins of 30%, so if you want to have it all be a multiple of profit, then divide the multiple by 0.3, then multiply that into yearly profit ((growth% / 10 + 1) / .3 * profit --or-- growth% / 10 * 2 / .3 * profit).
- chucksmash 10y agoI don't intuitively understand where that 0.1 comes from but otherwise it looks a lot like a formula for compounded growth of 5% a year that is missing an exponential term.