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So, if your site needs a full-time programmer, it's worthless. I mean, it's worth something to you because it can be your income. However, it's not worth anyth

by edb 18y ago

So, if your site needs a full-time programmer, it's worthless. I mean, it's worth something to you because it can be your income. However, it's not worth anything to an owner since they'd be paying all of the income to a programmer (yes, even if that's themselves since they aren't getting the site for free). I think this is false. If the buyer is able to run the site without hiring a programmer then the site provides a valuable income for the buyer. That income is a reward that could make the buy price worth it for the buyer, since the buyer will save the salary of the employee, no? I think when selling a web site or web application, it's important to choose a buyer that will know how to draw value from it, instead of squander its profits on employees that will do the work that the owner should be doing.

mdasen 18y ago
Nope. Let's say that it does need a full-time programmer. You pau $200,000 for this site assuming it will pay for itself in 4 years. But, since it requires a full-time programmer, you have to quit your job. Now you're just in debt. So, for the first 4 years, you have no income as you pay off $50,000 of that $200,000 each year. Well, that won't work. In fact, the government is going to want some of that in taxes, so it will probably be 6 years where your income is $0. I don't think it's a stretch to say that a decade is a long time for a site to stay relevant and in a good position. As such, if 80% of the money from the site goes to paying off the site, it isn't worth much. If it requires you to work on the site full-time, it's worth nothing since you'd be loosing the income you could get at another job. Whether you're doing the work or someone else is doing the work, if you have to quit your job, then the site must be able to satisfy your income PLUS profits that make the investment worthwhile. You've said that the income is a reward. So, would you pay me $200,000 and work for me full-time for 10 years for me to give you $50,000 per year for those 10 years? No! You could get a job paying $50,000 without paying someone $200,000. Now, let's say that you only had to work 3-4 hours a week. That's a VERY different story. Do you see where I'm going there? A site like the one described is a good investment if it can be a little site project that doesn't take much time. If it requires you to work full-time on it, $50,000 will cut it IF you don't have to buy it in the first place. If you have to pay $200,000, you might as well just get a traditional job paying $50,000 and not have to pay the $200,000.
- edb 18y ago
  I hear what you're saying. There's just a key point that I would like your opinion on: So, for the first 4 years, you have no income as you pay off $50,000 of that $200,000 each year. The assumption though is that it's a healthy company and will continue to grow, if not hold its revenue, otherwise the annual multiplier shouldn't be 4 and you shouldn't be buying it. However, for the sake of argument, let's assume that the above is true. Yes, you're not making an obvious income, but you are earning 50,000$ worth of a company at the end of each year with 0 investment from your pocket. Isn't that a good reward for your efforts? PLUS if the company grows, you keep the surplus in profits. What I'm saying is it's subjective/relative. If you're a person who's making 30,000$ per year and you want to make 50,000$ per year, then it's worth it to buy this company at 200,000$ since you will increase your yearly earnings, even if the first 4 years you're paying off the worth of the company. It's an investment, like a house. At the end of 4 years, you own a company that's worth 200,000$ or more, if you run it well, PLUS you have a salary of 50,000. That's not bad, and I think you could find someone who'd be interested in that, no? That's why I say pick your buyers. If you try to sell to someone who wants to buy the company and then sit on their couch while the company rakes in 50,000$ per year, then no, you won't be able to sell it for 200,000$. If you have someone who's looking for a new job and sees future growth potential in your company, then yes, 200,000$ is a good price. Does that make sense?

by edb 18y ago

mdasen 18y ago

Nope. Let's say that it does need a full-time programmer. You pau $200,000 for this site assuming it will pay for itself in 4 years. But, since it requires a full-time programmer, you have to quit your job. Now you're just in debt. So, for the first 4 years, you have no income as you pay off $50,000 of that $200,000 each year. Well, that won't work. In fact, the government is going to want some of that in taxes, so it will probably be 6 years where your income is $0. I don't think it's a stretch to say that a decade is a long time for a site to stay relevant and in a good position. As such, if 80% of the money from the site goes to paying off the site, it isn't worth much. If it requires you to work on the site full-time, it's worth nothing since you'd be loosing the income you could get at another job. Whether you're doing the work or someone else is doing the work, if you have to quit your job, then the site must be able to satisfy your income PLUS profits that make the investment worthwhile. You've said that the income is a reward. So, would you pay me $200,000 and work for me full-time for 10 years for me to give you $50,000 per year for those 10 years? No! You could get a job paying $50,000 without paying someone $200,000. Now, let's say that you only had to work 3-4 hours a week. That's a VERY different story. Do you see where I'm going there? A site like the one described is a good investment if it can be a little site project that doesn't take much time. If it requires you to work full-time on it, $50,000 will cut it IF you don't have to buy it in the first place. If you have to pay $200,000, you might as well just get a traditional job paying $50,000 and not have to pay the $200,000.

edb 18y ago
I hear what you're saying. There's just a key point that I would like your opinion on: So, for the first 4 years, you have no income as you pay off $50,000 of that $200,000 each year. The assumption though is that it's a healthy company and will continue to grow, if not hold its revenue, otherwise the annual multiplier shouldn't be 4 and you shouldn't be buying it. However, for the sake of argument, let's assume that the above is true. Yes, you're not making an obvious income, but you are earning 50,000$ worth of a company at the end of each year with 0 investment from your pocket. Isn't that a good reward for your efforts? PLUS if the company grows, you keep the surplus in profits. What I'm saying is it's subjective/relative. If you're a person who's making 30,000$ per year and you want to make 50,000$ per year, then it's worth it to buy this company at 200,000$ since you will increase your yearly earnings, even if the first 4 years you're paying off the worth of the company. It's an investment, like a house. At the end of 4 years, you own a company that's worth 200,000$ or more, if you run it well, PLUS you have a salary of 50,000. That's not bad, and I think you could find someone who'd be interested in that, no? That's why I say pick your buyers. If you try to sell to someone who wants to buy the company and then sit on their couch while the company rakes in 50,000$ per year, then no, you won't be able to sell it for 200,000$. If you have someone who's looking for a new job and sees future growth potential in your company, then yes, 200,000$ is a good price. Does that make sense?