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If you invest $100k in exchange for $25k services purchased, you now have $25k revenue. If your business is valued at a price/sales ratio of 20, your business
by fsk 12y ago
If you invest $100k in exchange for $25k services purchased, you now have $25k revenue. If your business is valued at a price/sales ratio of 20, your business is now worth $500k.
- pc86 12y ago> If your business is valued at a price/sales ratio of 20 How is that multiple even close to right? Everyone I've ever talked to says 5-10 is more realistic, and the push-back you get grows exponentially as you approach 10.
- fsk 12y agoIt depends on what kind of bubble you're in, and how negligent your investors are regarding due diligence. Obviously, if you invest $100k in a business in exchange for $25k services rendered, that isn't $25k of "real" revenue. During the 1999 .com bubble, Yahoo (iirc) and some other companies invested in startups, in exchange for an agreement to purchase their services. That let the corporation pad its revenue, inflate its earnings, and with an already-high P/E ratio, gullible investors bought.