6 ms·

Could just be me but it feels like feinternational always show a very inflated price. 3x seems too much specially for companies that are barely 1 year old. Als

Could just be me but it feels like feinternational always show a very inflated price. 3x seems too much specially for companies that are barely 1 year old. Also, it is extremely difficult to sign an NDA just to inquire more about a sale as feinternational does not give any details upfront. Totally understandable that the company in question wants to maintain its privacy, secrets etc but this is a difficult situation. How do we move forward without knowing more about a company but they want you to sign NDA even without giving any details.

jacquesm 11y ago
That's to protect the broker, not the company. They don't want you to bypass them.
- quickpost 11y ago
  Good call - that makes total sense! They get confirmation of the identity of the inquiry / lead before you can contact the owner directly.
- bostonpete 11y ago
  I would think it protects the company just as much. I've never sold a company but I'd imagine that people often don't want their customers and/or employees knowing that they're shopping the company around. Requiring an NDA before the company name is shared presumably makes it significantly less likely that word will spread in undesired ways...
  - yuhong 11y ago
    Not that it is a good practice in general IMO. I also don't like the "hush money" practice mentioned by Lane Becker either.
  - jacquesm 11y ago
    It's quite hard to gain traction on a corporate sale and you're right that keeping the customers and the consumers in the dark is 'par for the course', but to withhold the name of the company from an interested party serves only one goal. Think about it: I have this company for sale but I won't tell you which one it is until you sign this document. What's is there to lose for the company to have its name spread to those that might be interested? It's not like they're advertising the name in the NYT or making it public other than on a one-to-one basis with leads and those leads are definitely not going to publish the name if they're really interested because the last thing they need is more interest from others.
    - derefr 11y ago
      And journalists wouldn't pretend to be interested in purchasing companies just to get a scoop?
      - jacquesm 11y ago
        Not on this size companies. Mid sized deals involve 20 to 50 people 'in the know' and very rarely leak, even if the deals fall through. Any broker that can't tell a journalist from a serious entity won't be in business for long.
imaginenore 11y ago
3x doesn't seem bad at all. It's like an investment that generates 33.3% annually. After 3 years it's all free money.
- jasonlotito 11y ago
  While that's technically correct, with only 1 year of data behind it, it's arguably a bigger risk assuming that the first year of data will continue into the second year.
- manyhats 11y ago
  It's not free if you become an employee and need to put in time to maintain it. Think of it like a fast food franchise - you're buying a job, not a passive income stream.
- lsc 11y ago
  It's counting the founder's salary as profit. In these small businesses? founders usually have to do a good bit of work. what do they say? you are buying yourself a job? if you're making 33.3% of $50k-$500K per year... the very top end of that is close to what you'd get working for someone else, and usually you don't have to put down a half million to get those jobs. So, while I don't think I'd sell you my company for 3x SDC, I completely don't blame you for wanting to pay less than that. It'd really only make sense if you were sure that I had things setup to the point where I didn't have to do any work (which is something I can deceive myself about... I don't see how you could get a solid answer out of someone who had an interest in deceiving you.)
  - nedwin 11y ago
    "you are buying yourself a job?" Bingo. And the prospect of growing the business to a point where it can sustain a team and be less reliant on you. If the business can run without any input from the founder a) why would they sell it? and b) if they did they would sell at a much greater multiple.
    - heliodor 11y ago
deleted 11y ago
[deleted]
cpayne 11y ago
I hear a lot of talks about NDA's but I have never heard of one being enforced. Anyone else seen where an NDA was successfully enforced?
- paulsutter 11y ago
  Every civil court is backlogged with business misunderstandings / disagreements. People sue all the time for what may may not be legitimate reasons. All it takes is a simple majority of the jury for a victory. It's a highly subjective process whose most prized skill is the ability to sway a jury. More like coin toss, less like justice. In business it's a bad idea to deceive business partners or to sign an agreement intending to ignore it. Your reputation will catch up with you, and don't be surprised when you get sued.
justincooke 11y ago
When you're dealing with such small companies, they're usually pretty early in their market and might not have built up enough defensibility to share all of their information publicly. They'd rather limit disclosures to those who have taken some action to express interest. Public listings increase the number of copycats the end buyer will have to deal with. This isn't much of an issue for a well-established company with significant market share, but it is for a young software company fighting it out with their other (early) competitors.

jacquesm 11y ago

That's to protect the broker, not the company. They don't want you to bypass them.

quickpost 11y ago
Good call - that makes total sense! They get confirmation of the identity of the inquiry / lead before you can contact the owner directly.
bostonpete 11y ago
I would think it protects the company just as much. I've never sold a company but I'd imagine that people often don't want their customers and/or employees knowing that they're shopping the company around. Requiring an NDA before the company name is shared presumably makes it significantly less likely that word will spread in undesired ways...
- yuhong 11y ago
  Not that it is a good practice in general IMO. I also don't like the "hush money" practice mentioned by Lane Becker either.
- jacquesm 11y ago
  It's quite hard to gain traction on a corporate sale and you're right that keeping the customers and the consumers in the dark is 'par for the course', but to withhold the name of the company from an interested party serves only one goal. Think about it: I have this company for sale but I won't tell you which one it is until you sign this document. What's is there to lose for the company to have its name spread to those that might be interested? It's not like they're advertising the name in the NYT or making it public other than on a one-to-one basis with leads and those leads are definitely not going to publish the name if they're really interested because the last thing they need is more interest from others.
  - derefr 11y ago
    And journalists wouldn't pretend to be interested in purchasing companies just to get a scoop?
    - jacquesm 11y ago
      Not on this size companies. Mid sized deals involve 20 to 50 people 'in the know' and very rarely leak, even if the deals fall through. Any broker that can't tell a journalist from a serious entity won't be in business for long.

imaginenore 11y ago

3x doesn't seem bad at all. It's like an investment that generates 33.3% annually. After 3 years it's all free money.

jasonlotito 11y ago
While that's technically correct, with only 1 year of data behind it, it's arguably a bigger risk assuming that the first year of data will continue into the second year.
manyhats 11y ago
It's not free if you become an employee and need to put in time to maintain it. Think of it like a fast food franchise - you're buying a job, not a passive income stream.
lsc 11y ago
It's counting the founder's salary as profit. In these small businesses? founders usually have to do a good bit of work. what do they say? you are buying yourself a job? if you're making 33.3% of $50k-$500K per year... the very top end of that is close to what you'd get working for someone else, and usually you don't have to put down a half million to get those jobs. So, while I don't think I'd sell you my company for 3x SDC, I completely don't blame you for wanting to pay less than that. It'd really only make sense if you were sure that I had things setup to the point where I didn't have to do any work (which is something I can deceive myself about... I don't see how you could get a solid answer out of someone who had an interest in deceiving you.)
- nedwin 11y ago
  "you are buying yourself a job?" Bingo. And the prospect of growing the business to a point where it can sustain a team and be less reliant on you. If the business can run without any input from the founder a) why would they sell it? and b) if they did they would sell at a much greater multiple.
  - heliodor 11y ago

deleted 11y ago

[deleted]

cpayne 11y ago

I hear a lot of talks about NDA's but I have never heard of one being enforced. Anyone else seen where an NDA was successfully enforced?

paulsutter 11y ago
Every civil court is backlogged with business misunderstandings / disagreements. People sue all the time for what may may not be legitimate reasons. All it takes is a simple majority of the jury for a victory. It's a highly subjective process whose most prized skill is the ability to sway a jury. More like coin toss, less like justice. In business it's a bad idea to deceive business partners or to sign an agreement intending to ignore it. Your reputation will catch up with you, and don't be surprised when you get sued.

justincooke 11y ago

When you're dealing with such small companies, they're usually pretty early in their market and might not have built up enough defensibility to share all of their information publicly. They'd rather limit disclosures to those who have taken some action to express interest. Public listings increase the number of copycats the end buyer will have to deal with. This isn't much of an issue for a well-established company with significant market share, but it is for a young software company fighting it out with their other (early) competitors.