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Unfortunately companies only exit for 50 times earnings in Web 2.0 fantasy land. In the real world, it's closer to 2 or 3 times EBITDA(not revenue). If I could

by il 16y ago

Unfortunately companies only exit for 50 times earnings in Web 2.0 fantasy land. In the real world, it's closer to 2 or 3 times EBITDA(not revenue). If I could build a business to $20K in revenue and flip it for a million I, and many, many others making a living online, would be a millionaire many times over.

gjm11 16y ago
For others who like me didn't know what EBITDA meant without looking it up: "Earnings before interest, taxes, depreciations and amortization".
utunga 16y ago
An interesting recent example: http://flippa.com/auctions/84185/11000month-Revenue-No--1-In-Market-1500-Customers http://flippa.com/auctions/84185/11000month-Revenue-No--1-In... A 'lifestyle business' - but fairly "web2 buzzword compatible". And yet, according to the fairly believable numbers they made than $100K in profit in their first year (and about that much LTM also) and sold for only $90K after 18 months. That's a 'multiple' of only 0.9 ;-(
- il 16y ago
  Interesting example, as the creator of that site, dangrossman, posted in this thread. You can ask him about the sale. In that case, any smart buyer will instantly see that there is a sharp downward trend in revenue. Maybe the site is falling in the SERPS, new competitors have entered the market, or, worse, the target market is becoming saturated. This explains the low sale amount. Dan was smart to sell before revenue declined too much.
_delirium 16y ago
I can believe that 2-3x EBITDA is common, but it seems all the exits we hear about here, at least, must be higher than that (we admittedly probably hear about the more spectacular ones). Google bought Aardvark for $50m, for example--- did they really have $17-25m EBITDA at the time of the acquisition? Though I suppose a search engine buying another search engine could certainly fall under Web 2.0 fantasy land.
ABrandt 16y ago
I fully agree with you on the 2-3x multiplier, but lzw never claimed an evaluation based on 50 x Revenue. He stated that operating profit would be used--which is exactly what EBITDA essentially is. That being said, you probably could still flip a web company for $1M with the 50x multiplier (given $20k in revenue). If you're serving an SaaS to 167 customers (paying $10/mo), your EBIT to Sales ratio --> 1.00 with negligible variable costs. God bless the interwebs.
- il 16y ago
  I've sold several SaaS web sites with $10-$20k in revenue, not one of them for more than $50k. If you know anyone willing to give me a million dollars for the next one, PLEASE let me know.

by il 16y ago

gjm11 16y ago

For others who like me didn't know what EBITDA meant without looking it up: "Earnings before interest, taxes, depreciations and amortization".

utunga 16y ago

An interesting recent example: http://flippa.com/auctions/84185/11000month-Revenue-No--1-In-Market-1500-Customers http://flippa.com/auctions/84185/11000month-Revenue-No--1-In... A 'lifestyle business' - but fairly "web2 buzzword compatible". And yet, according to the fairly believable numbers they made than $100K in profit in their first year (and about that much LTM also) and sold for only $90K after 18 months. That's a 'multiple' of only 0.9 ;-(

il 16y ago
Interesting example, as the creator of that site, dangrossman, posted in this thread. You can ask him about the sale. In that case, any smart buyer will instantly see that there is a sharp downward trend in revenue. Maybe the site is falling in the SERPS, new competitors have entered the market, or, worse, the target market is becoming saturated. This explains the low sale amount. Dan was smart to sell before revenue declined too much.

_delirium 16y ago

I can believe that 2-3x EBITDA is common, but it seems all the exits we hear about here, at least, must be higher than that (we admittedly probably hear about the more spectacular ones). Google bought Aardvark for $50m, for example--- did they really have $17-25m EBITDA at the time of the acquisition? Though I suppose a search engine buying another search engine could certainly fall under Web 2.0 fantasy land.

ABrandt 16y ago

I fully agree with you on the 2-3x multiplier, but lzw never claimed an evaluation based on 50 x Revenue. He stated that operating profit would be used--which is exactly what EBITDA essentially is. That being said, you probably could still flip a web company for $1M with the 50x multiplier (given $20k in revenue). If you're serving an SaaS to 167 customers (paying $10/mo), your EBIT to Sales ratio --> 1.00 with negligible variable costs. God bless the interwebs.

il 16y ago
I've sold several SaaS web sites with $10-$20k in revenue, not one of them for more than $50k. If you know anyone willing to give me a million dollars for the next one, PLEASE let me know.