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He's thinking about it like a business person who is looking at buying a business. It's worth close to zero. In it's current state this business is not an asset

He's thinking about it like a business person who is looking at buying a business. It's worth close to zero. In it's current state this business is not an asset, it's a organization doing stuff. Breaking it out into SDE + adjustment is what the comment already does, albeit without using that terminology. One cannot hire a person who can do all the things this owner does. The person is a smart former google engineer. These people don't grow on trees. It would take a few people to do a bad approximation of what he does. The adjustment to SDE is going to be 100's of k and you get to 0 cash thrown off.

csa 3y ago
> It's worth close to zero. Serious question… have you bought a business before? It’s what I do. This business is not worth close to zero, and the stuff that the current owner does (even if he’s some miracle worker, which xooglers aren’t guaranteed to be) can be handled any number of ways that cost less than $236k by some buyer. This may not mean you or the person that I replied to, but you two most likely aren’t a part (and certainly not a significant part) of the market of buyers for businesses like this. I can’t tell if you’re circle jerking the owner, xooglers, or the (limiting) engineering way of thinking about businesses.
- danielmarkbruce 3y ago
  Yes. Lots of them. Who is the buyer? The logical buyer of this hardware business doing $1m per year and can backfill all the things this guy does at some low enough number that this business generates cash. And then, enough cash that it's worthwhile to go through diligence and paper up a deal and take on the risk that there isn't skeletons in the closet.
  - csa 3y ago
    > Who is the buyer? Realistically, the best buyer would be someone who has deep connections in a market that the current owner hasn’t penetrated that could 5x the volume almost instantly. They would hem and haw about whatever small multiple the seller is asking for, and then laugh all the way to the bank after close. I’ve seen this happen many, many times. > And then, enough cash that it's worthwhile to go through diligence and paper up a deal and take on the risk that there isn't skeletons in the closet For a business of this relatively small size, an agency would likely be used, and they would do all of this scutwork, and their fee is paid by the seller. Which agency or agencies have you used (if any)?
    - danielmarkbruce 3y ago
      > Realistically, the best buyer would be someone who has deep connections in a market that the current owner hasn’t penetrated that could 5x the volume almost instantly. This is a nice theory. And it could be true, and it does happen, but it's more than likely not. You must be using better M&A brokerages/bankers than I ever have. None of them do actual diligence, they are selling the business...They are actively making the business look different to what it is. They certainly don't take on any risk (they are not a party to the agreement in any way) and they certainly don't obviate the need to use and pay a lawyer (and most small deals are each person pays their own costs). With respect, are you actually buying businesses? Or just doing contracted technical DD? It feels like you are missing a good chunk of the picture here. The default take on the value of this business by a lot of folks buying businesses is going to be "close to zero". I mean, to be fair, I have not ever bought a hardware business so I'm a little out of my depth here... but.. not miles out.
      - csa 3y ago
        > This is a nice theory. It could be true, it's likely not. I’ve done it / do it with taking products and services to certain East Asian markets. And sometimes scaled quickly at much more than 5x of the original revenue. > You must be using better M&A brokerages/bankers than I ever have. FEI is one such broker, and know people on both sides of transactions done through them that are happy. I haven’t used them personally, but that’s one example. They definitely do due diligence. > With respect, are you actually buying businesses? Or just doing contracted technical DD? It feels like you are missing a good chunk of the picture here. Funny, I was about to ask/say the same thing. Yes, I buy businesses. No, I don’t do technical DD contract or otherwise (frankly, I’m not tech savvy enough to do that on my own — I can sniff out some bad code, but I let the pros do what they do). I/we are on HN reply delay to prevent “flame wars”, even though I don’t think we are flaming. As such, I will stop here. If you are what you actually say you are, I wish you luck and all the success in the world. That said, I stand by everything I have said above.
        danielmarkbruce 3y ago
  - windowshopping 3y ago
    You should write something about what you do too. Buying businesses sounds interesting, can you expand on this?
- windowshopping 3y ago
  You should write something about what you do too. Buying businesses sounds interesting, can you expand on this?
  - danielmarkbruce 3y ago
    There are lots of books written about buying businesses. I'll give some insight - it's like turning over stones. You turn over a lot before you find anything.
    - csa 3y ago
      > I'll give some insight - it's like turning over stones. You turn over a lot before you find anything. Priceless and totally agree. The deal flow can be streamlined somewhat, but you’re still turning over a lot of stones.
  - csa 3y ago
    > You should write something about what you do too. I think most of what one needs to know is already out there. The key is being adaptable to the current environment and being aware of one’s value add (skill set, network, etc.). The problem with writing specifics about what I do is that it invites competitors and/or haters (e.g., review bombers or DDoSers). Some parts of my businesses have enough moat such that I don’t care, but other parts definitely do not. It’s not something I want to spend additional brain cycles on. > Buying businesses sounds interesting, can you expand on this? It’s largely not. It’s financially comfortable, and it’s nice being your own boss / leading your own team if that’s what you’re into (I am), but I’ve done more interesting work while working for “The Man”. A lot of what I do is just streamline a system that was inefficiently run/managed. What I do is very similar to what Andrew Wilkinson of TinyCo has done, except I am about 10 years back on his timeline, and I’m not sure I will end up going public. I recommend looking for interviews and podcasts with Andrew — I have found them to be super interesting. In relatively vague terms, I started a web dev agency, and then used that cash flow to start buying businesses that generate additional cash flow. Rinse and repeat. This is exactly what Andrew did. Note that I didn’t learn about Andrew until last year, so I was happy to see someone taking a similar path and scaling to a holding co worth over half a billion. Some things that I think folks don’t do well when buying and/or valuing businesses (both buyers and sellers): - Keep an active deal flow pipeline, ideally one that is not widely tapped. This usually entails talking to people… lots of people. For example, finding solid businesses on FEI is possible, but they will be very competitively priced, and it will be prudent to have some sort of pocket growth “hack” in mind if you want to make it pay off handsomely. On the other hand, targeting some “mom and pops” that have little or no idea about SEO and SEM can present some soft deals. - Figure out ways that one party can scale that others can’t. This is the type of “growth hack” that I mentioned above. I know one guy who has one main move. He looks for businesses in which he already buys some of their inputs at a huge volume discount that smaller businesses can’t access (supplements are an example of this… I don’t recommend getting into supplements unless you are already eyeballs deep in that world). Another example is having access to markets or distribution that the businesses you are targeting to buy don’t have. One area I target (when relevant) that many others don’t is East Asian markets. Another area I target is just increasing prices (usually via segmentation). So many businesses charge way less than the market will bear. - Learn how to negotiate, including how to say no. Many people just lay down and leave a ton of money on the table. You don’t have to be an asshole about it, but it’s prudent to be aware of what the value is for both the buyer and the seller, and it’s not uncommon for the buyer to have significant upside potential. - As someone else said, you’re basically turning over a lot of rocks. There are a lot of people trying to bamboozle you, and there are a lot of solid businesses that don’t really offer a growth opportunity that you can efficiently maximize. When you find something that fits, it’s often a no-brainer. Let me know if you have any other questions. I will be happy to answer. I will add as a caveat that I can only give you perspective from my limited experiences — there are myriad ways to buy and sell businesses profitably, and my path is only one of them.
- Aurornis 3y ago
  > (even if he’s some miracle worker, which xooglers aren’t guaranteed to be) > I can’t tell if you’re circle jerking the owner, xooglers, or the (limiting) engineering way of thinking about businesses. I don't know why you're being so unnecessarily demeaning about ex-Google people or trying to downplay the accomplishments of the person who wrote the blog post. There's no need to call it "circle jerking" if someone acknowledges that the founder of a successful business has accomplished a lot, well above and beyond what an average engineer can pull off.
  - csa 3y ago
    > I don't know why you're being so unnecessarily demeaning about ex-Google people or trying to downplay the accomplishments of the person who wrote the blog post. Fair comment, and I thought about changing it. I didn’t for reasons listed below: - The comment was mainly directed at xooglers, specifically the mindset some folks have towards them. Googlers and xooglers were something to behold in the “don’t be evil” days. That reputation has decreased substantially since, imho (I’m guessing directly or indirectly due to structural changes in the org). This is not to say that there aren’t some super impressive googlers and xooglers (there are), but the hit rate is much lower than it once was. If the op had just said “a smart engineer”, I wouldn’t have commented on it — I imagine the dude is plenty smart, although I doubt that it makes his efforts difficult to replace (see below). - In general, I try to take the air out of reputation virtue signals that I think may not be warranted. Google, googlers, and xooglers are now in this category. Other groups in this category are groups like Harvard grads, Stanford grads, MBAs, PhDs, name brand consulting firms, name brand IB firms, etc. Note that I am a member of several groups that sometimes send these virtue signals (I try my best not to), so I’m dog fooding my own criticism every day. - I don’t know the engineer who owns the business, but I find it unlikely that he does things that both must be done and must be done at a (relatively high) labor price that the owner could command in the market. I expect neither are true. The “circle jerk” comment was a reference to me thinking that the person I was replying to was putting far too much weight on something that has (imho) much less impact on the profitability and ultimately the price of the business. I’m OK disagreeing on this point — different strokes for different folks, and that’s why the market price talks.
iepathos 3y ago
These people actually do grow on a tree called Google. All the Google layoffs means there are more smart former google engineers than ever currently available for hire. More importantly, doesn't have to be a former google engineer, any smart engineer can do what he currently does, google didn't teach him anything special they just hire smart engineers when they find them.
- rjzzleep 3y ago
  There’s a reason they were laid off. I find this mind boggling, I’ve met so many mediocre and low performers that are still highly sought after by simple virtue of having done nothing at faang or Stanford. It’s basically the software engineering professions McKinsey. Everything they touch is a huge money sink with no real added value and probably long term damaging to society and yet somehow they all keep climbing the ladder. All while other actually high value people are just lost in the noise.
  - ipaddr 3y ago
    I agree with you overall. But the reason someone is laid off mostly likely has no bearing on ability or actions. Not having the ability to influence layoff decisions doesn't mean you were a bad engineer or providing more value than others
sokoloff 3y ago
I have no particular advantage in this space and don’t even own a TinyPilot. I think it’s worth $250K to me, and think it’s worth much more than that to someone who can create additional value by virtue of having some advantage relevant to the business (existing manufacturing, fulfillment, service, etc ops).

csa 3y ago

> It's worth close to zero. Serious question… have you bought a business before? It’s what I do. This business is not worth close to zero, and the stuff that the current owner does (even if he’s some miracle worker, which xooglers aren’t guaranteed to be) can be handled any number of ways that cost less than $236k by some buyer. This may not mean you or the person that I replied to, but you two most likely aren’t a part (and certainly not a significant part) of the market of buyers for businesses like this. I can’t tell if you’re circle jerking the owner, xooglers, or the (limiting) engineering way of thinking about businesses.

danielmarkbruce 3y ago
Yes. Lots of them. Who is the buyer? The logical buyer of this hardware business doing $1m per year and can backfill all the things this guy does at some low enough number that this business generates cash. And then, enough cash that it's worthwhile to go through diligence and paper up a deal and take on the risk that there isn't skeletons in the closet.
- csa 3y ago
  > Who is the buyer? Realistically, the best buyer would be someone who has deep connections in a market that the current owner hasn’t penetrated that could 5x the volume almost instantly. They would hem and haw about whatever small multiple the seller is asking for, and then laugh all the way to the bank after close. I’ve seen this happen many, many times. > And then, enough cash that it's worthwhile to go through diligence and paper up a deal and take on the risk that there isn't skeletons in the closet For a business of this relatively small size, an agency would likely be used, and they would do all of this scutwork, and their fee is paid by the seller. Which agency or agencies have you used (if any)?
  - danielmarkbruce 3y ago
    > Realistically, the best buyer would be someone who has deep connections in a market that the current owner hasn’t penetrated that could 5x the volume almost instantly. This is a nice theory. And it could be true, and it does happen, but it's more than likely not. You must be using better M&A brokerages/bankers than I ever have. None of them do actual diligence, they are selling the business...They are actively making the business look different to what it is. They certainly don't take on any risk (they are not a party to the agreement in any way) and they certainly don't obviate the need to use and pay a lawyer (and most small deals are each person pays their own costs). With respect, are you actually buying businesses? Or just doing contracted technical DD? It feels like you are missing a good chunk of the picture here. The default take on the value of this business by a lot of folks buying businesses is going to be "close to zero". I mean, to be fair, I have not ever bought a hardware business so I'm a little out of my depth here... but.. not miles out.
    - csa 3y ago
      > This is a nice theory. It could be true, it's likely not. I’ve done it / do it with taking products and services to certain East Asian markets. And sometimes scaled quickly at much more than 5x of the original revenue. > You must be using better M&A brokerages/bankers than I ever have. FEI is one such broker, and know people on both sides of transactions done through them that are happy. I haven’t used them personally, but that’s one example. They definitely do due diligence. > With respect, are you actually buying businesses? Or just doing contracted technical DD? It feels like you are missing a good chunk of the picture here. Funny, I was about to ask/say the same thing. Yes, I buy businesses. No, I don’t do technical DD contract or otherwise (frankly, I’m not tech savvy enough to do that on my own — I can sniff out some bad code, but I let the pros do what they do). I/we are on HN reply delay to prevent “flame wars”, even though I don’t think we are flaming. As such, I will stop here. If you are what you actually say you are, I wish you luck and all the success in the world. That said, I stand by everything I have said above.
      - danielmarkbruce 3y ago
- windowshopping 3y ago
  You should write something about what you do too. Buying businesses sounds interesting, can you expand on this?
windowshopping 3y ago
You should write something about what you do too. Buying businesses sounds interesting, can you expand on this?
- danielmarkbruce 3y ago
  There are lots of books written about buying businesses. I'll give some insight - it's like turning over stones. You turn over a lot before you find anything.
  - csa 3y ago
    > I'll give some insight - it's like turning over stones. You turn over a lot before you find anything. Priceless and totally agree. The deal flow can be streamlined somewhat, but you’re still turning over a lot of stones.
- csa 3y ago
  > You should write something about what you do too. I think most of what one needs to know is already out there. The key is being adaptable to the current environment and being aware of one’s value add (skill set, network, etc.). The problem with writing specifics about what I do is that it invites competitors and/or haters (e.g., review bombers or DDoSers). Some parts of my businesses have enough moat such that I don’t care, but other parts definitely do not. It’s not something I want to spend additional brain cycles on. > Buying businesses sounds interesting, can you expand on this? It’s largely not. It’s financially comfortable, and it’s nice being your own boss / leading your own team if that’s what you’re into (I am), but I’ve done more interesting work while working for “The Man”. A lot of what I do is just streamline a system that was inefficiently run/managed. What I do is very similar to what Andrew Wilkinson of TinyCo has done, except I am about 10 years back on his timeline, and I’m not sure I will end up going public. I recommend looking for interviews and podcasts with Andrew — I have found them to be super interesting. In relatively vague terms, I started a web dev agency, and then used that cash flow to start buying businesses that generate additional cash flow. Rinse and repeat. This is exactly what Andrew did. Note that I didn’t learn about Andrew until last year, so I was happy to see someone taking a similar path and scaling to a holding co worth over half a billion. Some things that I think folks don’t do well when buying and/or valuing businesses (both buyers and sellers): - Keep an active deal flow pipeline, ideally one that is not widely tapped. This usually entails talking to people… lots of people. For example, finding solid businesses on FEI is possible, but they will be very competitively priced, and it will be prudent to have some sort of pocket growth “hack” in mind if you want to make it pay off handsomely. On the other hand, targeting some “mom and pops” that have little or no idea about SEO and SEM can present some soft deals. - Figure out ways that one party can scale that others can’t. This is the type of “growth hack” that I mentioned above. I know one guy who has one main move. He looks for businesses in which he already buys some of their inputs at a huge volume discount that smaller businesses can’t access (supplements are an example of this… I don’t recommend getting into supplements unless you are already eyeballs deep in that world). Another example is having access to markets or distribution that the businesses you are targeting to buy don’t have. One area I target (when relevant) that many others don’t is East Asian markets. Another area I target is just increasing prices (usually via segmentation). So many businesses charge way less than the market will bear. - Learn how to negotiate, including how to say no. Many people just lay down and leave a ton of money on the table. You don’t have to be an asshole about it, but it’s prudent to be aware of what the value is for both the buyer and the seller, and it’s not uncommon for the buyer to have significant upside potential. - As someone else said, you’re basically turning over a lot of rocks. There are a lot of people trying to bamboozle you, and there are a lot of solid businesses that don’t really offer a growth opportunity that you can efficiently maximize. When you find something that fits, it’s often a no-brainer. Let me know if you have any other questions. I will be happy to answer. I will add as a caveat that I can only give you perspective from my limited experiences — there are myriad ways to buy and sell businesses profitably, and my path is only one of them.
Aurornis 3y ago
> (even if he’s some miracle worker, which xooglers aren’t guaranteed to be) > I can’t tell if you’re circle jerking the owner, xooglers, or the (limiting) engineering way of thinking about businesses. I don't know why you're being so unnecessarily demeaning about ex-Google people or trying to downplay the accomplishments of the person who wrote the blog post. There's no need to call it "circle jerking" if someone acknowledges that the founder of a successful business has accomplished a lot, well above and beyond what an average engineer can pull off.
- csa 3y ago
  > I don't know why you're being so unnecessarily demeaning about ex-Google people or trying to downplay the accomplishments of the person who wrote the blog post. Fair comment, and I thought about changing it. I didn’t for reasons listed below: - The comment was mainly directed at xooglers, specifically the mindset some folks have towards them. Googlers and xooglers were something to behold in the “don’t be evil” days. That reputation has decreased substantially since, imho (I’m guessing directly or indirectly due to structural changes in the org). This is not to say that there aren’t some super impressive googlers and xooglers (there are), but the hit rate is much lower than it once was. If the op had just said “a smart engineer”, I wouldn’t have commented on it — I imagine the dude is plenty smart, although I doubt that it makes his efforts difficult to replace (see below). - In general, I try to take the air out of reputation virtue signals that I think may not be warranted. Google, googlers, and xooglers are now in this category. Other groups in this category are groups like Harvard grads, Stanford grads, MBAs, PhDs, name brand consulting firms, name brand IB firms, etc. Note that I am a member of several groups that sometimes send these virtue signals (I try my best not to), so I’m dog fooding my own criticism every day. - I don’t know the engineer who owns the business, but I find it unlikely that he does things that both must be done and must be done at a (relatively high) labor price that the owner could command in the market. I expect neither are true. The “circle jerk” comment was a reference to me thinking that the person I was replying to was putting far too much weight on something that has (imho) much less impact on the profitability and ultimately the price of the business. I’m OK disagreeing on this point — different strokes for different folks, and that’s why the market price talks.

iepathos 3y ago

These people actually do grow on a tree called Google. All the Google layoffs means there are more smart former google engineers than ever currently available for hire. More importantly, doesn't have to be a former google engineer, any smart engineer can do what he currently does, google didn't teach him anything special they just hire smart engineers when they find them.

rjzzleep 3y ago
There’s a reason they were laid off. I find this mind boggling, I’ve met so many mediocre and low performers that are still highly sought after by simple virtue of having done nothing at faang or Stanford. It’s basically the software engineering professions McKinsey. Everything they touch is a huge money sink with no real added value and probably long term damaging to society and yet somehow they all keep climbing the ladder. All while other actually high value people are just lost in the noise.
- ipaddr 3y ago
  I agree with you overall. But the reason someone is laid off mostly likely has no bearing on ability or actions. Not having the ability to influence layoff decisions doesn't mean you were a bad engineer or providing more value than others

sokoloff 3y ago

I have no particular advantage in this space and don’t even own a TinyPilot. I think it’s worth $250K to me, and think it’s worth much more than that to someone who can create additional value by virtue of having some advantage relevant to the business (existing manufacturing, fulfillment, service, etc ops).