Great question. I believe that almost everyone here in HN is trying to reach the same goal.
I don't have $1M, but can't imagine that you would reach this goal (I suppose of having $1M available, meaning that you paid already your apartment and car) without learning how stocks work.
I would say that you should learn do be "one day trader" first, and once you master that you could start investing in the long term, with a portfolio of stocks, bonds and other investments.
This is how I imagine that one could have that sum of money. Anyone agree?
And he would have just told those potential buyers that he is tired of running his company and desperately wants to get rid of it, thus giving them lots of leverage in negotiations.
Yes, that's correct, his initial wording should have been a bit more diplomatic then.
Even so, if there are multiple potential buyers you will likely fetch market value, if you are actively selling the reason why you sell is not so important as finding a good market to sell it to.
If there is only one buyer then it changes matters considerably.
For me it means that you (or anyone who give those short-answers) do not care so much about the matter.... am I correct?
But I'm thinking about tell what is the product.... I can tell that we're making a script to add to any website and we have a handful number of customers.
We've been thinking of getting revenues by advertisement, but in order to get significant revenues we need to spread to many websites.
For me it means that you (or anyone who give those short-answers) do not care so much about the matter.... am I correct?
sorry to sound rude, but you were the one who asked for advice here ... if i were you, i'd be grateful that people chime in with any thoughts at all, regardless of length. you can't expect people to write an entire inspired essay based on your (very short) question
if i were you, i'd be grateful that people chime in with any thoughts at all
that's a bit much don't you think? HN is a community based around learning about/discussing this exact sort of thing. he asked an earnest question and felt he received a half-assed response. so he called it out.
it happens here all. the. time. it's why i love reading this site, trite reponses get torn apart.
Notice how your comment missed the mark emotionally. Someone took time out of their day to give you good advice and you implied that they don't care. You took an innocuous statement and painted it black. I know it was an honest mistake--I'm not judging you for it--I just want you to notice that.
Also reread your post. Notice how you are describing depressive symptoms (fatigue and you even mentioned depression). Only you know if you are depressed. But if you are, then be careful about making a big decision. Depressive thinking skews your judgment. Problems seem more permanent and intractable. Your intuition for evaluating costs, benefits, and risks gets distorted.
>>Notice how your comment missed the mark emotionally.
Yes, that's true.... It's been like a roller-coaster of emotions, and that influenced my comment. I've been thinking a lot before posting this to HN.
>>Notice how you are describing depressive symptoms
True... It has a LOT to do with the time that I've spent on it, the numerous negative feedback of people (that wouldn't work, too hard, you should do something else, etc).
I learned that you can fight back those comments, but there is a limit, and after that it start to play with your head.
Tks for the hint, I can see how it is influencing my judgment, but I believe that will still proceed and contact a possible buyer on Monday.
Sometimes a short answer is the simplicity on the other side of deep understanding.
Do you value an ounce of gold based on the hours that went into mining and refining it, or a Picasso based on the quantity of paint that went into it?
It's worth the value the buyer can get out of it, not what you put into it. Typically that's the expected values of future cash flows, discounted to the present using an appropriate risk-adjusted discount rate.
You can estimate how much cash it might generate under various scenarios, and estimate the probability of those scenarios transpiring, to come up with a value.
If you can persuade someone there is future cash flow, you can sell it. Otherwise, you can get a dime for it if you throw in a couple of nickels.
(disregarding strategic, humanitarian reasons to buy it, or the possibility someone is planning to spend X hours to build the exact same thing.)
Taking exception with some of the above statements on valuation. There are actually three relevant methods for deriving a value, with the circumstances & audience dictating which approach (be it single or blended) to use:
1) Income Method
As stated, discounted cash flows.
2) Replacement Cost
What would it cost me today to recreate this asset from scratch?
3) Comparable Sales
What price has recently been paid for similar assets?
My assumption was that the OP brought this up because he needed to justify a valuation to the co-founders, not because he is trying to dictate a replacement cost to potential buyers.
NB. There are many nuances to each of these approaches and most situations can be taken into account with the appropriate tweaks; if anyone is curious, there are firms which specialize in this or you can start here: http://en.wikipedia.org/wiki/Business_valuation
Second, your answer is to a different question - what is a reasonable theoretical valuation for a minority shareholder based on various potential outcomes? Not: at what price could I sell 100% of the asset in the market right now?
An actual cash purchaser is always giving up a current cash flow because they expect a larger future cash flow.
In your example, 2 and 3 can also be viewed based on cash flows. If you plan to build the same thing, buying it instead eliminates the negative cash flow of building it. Comparable transactions are based on how others valued comparable cash flows.
Economically, it's always about the cash flow. Of course, economics isn't everything, there are trophy properties, social motives etc.
Well. That should be a simple decision. Would 'many websites' want/need it, if so would it be enough to generate more ad revenue than you'll loose in subscriptions/customer revenue?
If so than you have a viable business model. If not, than stick to your current 'sell it to them' plan.
Give away, and ad support, things that everyone needs or wants. Charge for niche content. It's the way of the internet, currently.
Really though more info is necessary. For instance if it's a certain type of SaaS you may be able to make a living on paid support without either option, or if it's a cool webapp than perhaps a freemium model should be embraced.
Valuing code and valuing a business are two different things. The value of code relates to its utility to its intended purchaser, its quality, and the difficulty of reproducing the same code from scratch.
The value of a business is directly related to the bottom line. Companies with no sales are a dime a dozen. They're one step ahead of "ideas", and may even be worse off. A company with no sales is a idea that has proven its ability to fail.
I don't have $1M, but can't imagine that you would reach this goal (I suppose of having $1M available, meaning that you paid already your apartment and car) without learning how stocks work.
I would say that you should learn do be "one day trader" first, and once you master that you could start investing in the long term, with a portfolio of stocks, bonds and other investments.
This is how I imagine that one could have that sum of money. Anyone agree?