Actually, Legos are Danish. Legos are Denmark's largest export product, followed by dairy products and herring. Notice the lack os an s on herring. Herring is one of the real unaltered plurals in the English language.
Welcome to the 1990's. The high technology market isn't driven by dividends, but by potential. Microsoft has so much cash its literally bursting at the seams, but it has yet to issue dividends, because it feels it still has a ton of room to grow through R&D and acquisitions. Potential is what the markets is all about. If you want safe, steady, earnings, go buy yourself an annuity.
That's very true - and a lot of what I said might not apply to specific situations. I'll bet there are rules of thumb for valueing web sites that I don't know about. And if, for example, your teeny company had a great product or held a valuable patent, you could expect to get a lot more and the price would have a much lower relationship to earnings. But web sites don't usually have products or patents (usually....groan).
So, you say multiples of 3 to 5? On what are you basing these numbers? I don't have any experience with this sort of thing, but why would this differ from "normal" multiples, such as Yahoo's? What difference does it make if the site in question is actually a functioning company, rather than some guy in a basement cold-calling potential advertisers to make some cash on the side? What other factors would be involved in the valuation?
That 3 to 5 number is a rough rule of thumb. Usually things just work out that way. The problem with 'normal' multiples such as Yahoo's, is that they aren't normal. The valuation a company has on the stock market has little or no connection to the valuation process a prospective buyer goes through when considering the purchase of a company (that is, a buyer who knows what he/she is doing).
In calculating the value of a small business especially, you have to remember one thing: the buyer, any buyer, is in it for the money and they will consider primarily the return they will get on that money when deciding how much to offer for a business. Leaving aside synergies, etc. let me lay this out very simply, lord knows it took me a while to understand it: A buyer has, say $500,000 to invest. He has several options on what to do with it. He could invest it in the stock market - pretty good investment, these days. He might expect to get 15% to 25% back on that money every year depending on what stocks he picks. Or he could invest in bonds and get 10% a year. Now why would any choose to get 10% a year instead of 15%? Because bonds are much safer than stocks. You invest in the stock market, you risk all sorts of nasty things happening to your money. For whatever reason, our hypothetical buyer is considering buying a business with his money instead of stocks and bonds. Buying a business is extremely risky. Businesses fail all the time. For that reason, a buyer demands a very high rate of return. They will expect to get around %17 back yearly on their money.
How is this calculated? It involves a lot of fiddling with financial statements and predictions about the future. But let's assume for the sake of this example that the web site cited above had earnings of $20,000 last year. Let's assume that profits grow 15% a year over the next five years. That means in 2000 it will make $23,000, in 2001 it will make c. $26,450, in 2002 it will make $30,417, in 2003 c. $35,000, in 2004 $40,000. Total earnings over the next three years: $134,150.
Return to the 3-to-5 times earnings multiple. Consider the high end - 5 times earnings. If our buyer invested $100,000 in the stock market and got an ROI (return on investment) of 15%, he would earn $152,000 in the next three years. So why should he pay $100,000 for your company and lose $17,000? He'd probably want to pay a good deal less for it.
There are always strategic fits, synergies, and 'potential' that might induce a bueyr to pay more than the strictly financial value of a company. But don't count on it. If it's a publicly held company, you might think they have tons of $$ to throw around, but if they pay you 20 times the value of your business, they will have to explain it to their shareholders. And sure, maybe your website has tons of 'potential'; but how much money are they going to have to spend to realize that potential? They need to spend a ton of money on advertising and expanding the site? That will affect their ROI significantly. Your users might call you a sell-out and desert you? High rate of risk - they will want a higher ROI.
That was a lot more complicated than I wanted it to be, but you get the picture - it's a complicated scenario, there are a lot of factors, but anybody with enough money to want to buy your company is going to know what's up and they will not want to over-pay.
Re:As someone who sells businesses for a living... (Score:1) by cybermage (john@mjm.net) on 12:28 PM March 30th, 2000 EST (#138) (User Info)
...Typical valuations are at 3 to 5 times earnings. Given that this site is grossing $20,000 yearly, I'd say an asking price of $650,000 is off by a factor of ten at least.
I think you mean Sales rather than earnings. Sales is your gross income whereas earnings are what is left over after you deduct all your expenses. Yahoo (YHOO) trades at a p/e of 1719 but the p/s is 159, a much smaller number (source).
Nope. I meant earnings, NOT sales. earnings = profit. Usually in an acquisition, the figure that is used is EBIT or EBITDA (earnings before interest and taxes, earnings before interest, taxes, depreciation). The reason for this is simple. Profit margins vary considerably. Say you were running a trucking company where you had $20 million in sales and your profit was $500,000 yearly. Now compare this to a distributing company with high profit margins that has $1,500,000 in sales and makes $500,000 in profits. Now consider how much money a buyer would get out of these companies if he bought them - the exact same amount, $500,000 per year. Why would he pay more based on the volume of sales when that number does not translate into an increased return on his investment?
That's right, a business broker reading slashdot. Surprise!
20x earnings is an absurdly high multiple for any business. The problem with this discussion is that you are comparing this web site to the market valuation of public web sites - also absurdly high. Typical valuations are at 3 to 5 times earnings. Given that this site is grossing $20,000 yearly, I'd say an asking price of $650,000 is off by a factor of ten at least. Think about this logically. Any buyer is in this as an investment. If they aren't getting a good rate of return, why not invest in a mutual fund? 'Potential' for huge future earnings is all very well, but you have to consider where those earnings will come from - probably their financial investment in the site - and whether or not your website has any more potential than the 100s of other similar websites.
You might be able to get more money by structuring some kind of earnout, where your compensation is linked to some specific performance index.
Sorry to contradict you, but one other, more important right based on age has lowered - the right to vote used to 21! Now it's 18. This seems to me to be a much more important right than buying (not drinking, as you stated) alcohol.
(warning, gross generalizations ahead! when I talk about women in general I mean the way 90% of them usually behave)
Nothing wrong with gross generalizations - except that the ones you make are incorrect. What data do you base your assertion that Female gamers get hooked on games that they just find lying around, like Solitaire and Tetris on? It takes corporations $$ on market research to determine the methods whereby various consumer groups make purchases.
They enjoy that type of game, which tends to be pure game and not an exciting assault on the senses, nor a simulate fantasy.
This one might be true - but it's a totally different premise from your previous statement about HOW women buy games. Method of shopping not equal to type of purchase.
How could you advertise to a market like that? Why would they exert the effort to look for another game when they've got a perfectly good one in front of them? How could you even describe the added enjoyment without letting them play the game?
It's hard for me to describe how much this statement offends me. Are women incapable of the abstract thought necessary to grasp these concepts? Gee, you mean even though I already own one game, there's another game out there that I might like too? Amazing!!
I see no reason why games - especially the thinking games so many people on this thread assume are what appeals to women (news flash - can't stand 'em myself, and all the people I knew who owned MYST were guys) can't be advertised and marketed to women in the same way as books.
Should we be concerned that entire social groups - women, newcomers - don't feel welcome here?
Sorry to contradict, Jon, but I don't feel unwelcome 'here', not sure what definition of here you were using right then. Neither on Slashdot in particular or on the Internet in general have I felt unwelcome.
Having lived in a cooperative, I have some experience with arbitration methods similar to some you discuss. Trust me - they don't work. Sooner or later, they always spiral out of control. The only solution is to IGNORE 'EM!
I really have to ask, does anyone know is SPAM profitable? Are these just un-informed idiots that really don't know that they're wasting their time? Does anyone have information on this?
Furthermore has anyone even _heard_ of someone that bought something because of SPAM?
I've received SPAM that I believe to be quite profitable and which probably attracts a large number of users to the sites being advertised. My e-mail address is listed on several business brokerage sites, and every day I get e-mail advertising new sites. I don't visit them because SPAMMers must die ehm, I mean, I don't support their use of that advertising medium, but I bet lots of other people whose e-mails are up on similar sites would. This is targeted SPAM and not quite the random stuff you're talking about, but....
I think the law has to treat the person who uses a product for illegal means as the "guilty" party. The person who makes it bears no automatic culpability.
This is my general take. Gun manufacturers are not responsible for murders committed with guns. Now, I'm not a gun nut, but I think this is legally right.
a)class action lawsuits are now under way against several gun manufacturers.
b)cigarette manufacturers
c)LAW is a seperate issue from responsibility. I think in any crime, there may be people who bear responsibility for the crime whom the law should not pursue.
d) Responsibility is a renewable resource. An individual is 100% responsible for his actions; that doesn't mean other people can't be responsible too.
One thing that I've noticed is that if an author writes a Star Trek book, they tend to be dismissed by 'real' SF fans unless they've a track record outside that genre.
Not to criticize Blish, who has written some excellent work, but 'real' SF fans, or any other kind of fans, tend to dismiss authors who write crap(pulp). Have you read Blish's ST novelizations? Crap. I don't see anyone dismissing, say, Peter David or Diane Duane for writing ST books. Because they were good books.
(My first-date test? I unlock the passenger door for her. If she leans over and unlocks my door, that's a Good Thing. Otherwise, well... it's generally been downhill from there.)
too funny. Did you know that 'Mars & Venus on a date' specifically tells the woman NOT to lean over and unlock the driver-side door for the man on a first date? Of course, you may not be wanting to date the kind of person reading those books anyhow....
Obviously haven't been in Vegas recently.:-) Most people gamble with coins, not chips, and they gamble at slot machines, not tables. Slot machines can be the traditional one-armed bandit. But don't forget the computer poker machines. These are mostly very low-tech, but there are some great touch-screen video-poker games with sophisticated graphics. I don't usually emjoy gambling, but I play them for the pretty graphics and the sound effects, no joke.
Ob rant - I live in California, and they have a state lottery. There's no ban on gambling, just a state-run monopoly.
not too sure about the reasoning on this one - if you blew $70K in Vegas, you would be sitting in a big hotel, having gone to the trouble of travelling there; you would have gone and exchanged your cash for chips (and you would have had to obtain that money in advance, as I doubt casinos would give most people much credit); you would have sat at a table, putting piles of chips onto a board (or whatever) and watched them pulled away from it as you lost. This is all physical, understandable, and there. Ok, now we cut to online gambling. A user sits and plays what is in effect a video game - just like they have been playing since they were kids. they click buttons, they toggle lights, and when they click the right or wrong button, numbers appear on the screen
""OK. The idea that, right off the bat, evolution shouldn't be taught because the Bible says the world was created in 4004 BC is just batty. Especially when one stops to consider that what appears in the Bible as "day" really means "period of time," and with a few minor exceptions the order that things were "created" in is a pretty good match for evolutionary theory. I also think that the theory of evolution is the best one out there.""
For a review of the whole debate, including the arguments outlined above, check out The Talk.Origins Website.
'I am tired of this attitude that because people are newbies we need to "forgive" them. The whole point of RTFM is that no one ever does. Im glad I was told RTFM when I was first getting into Linux, because if it weren't for that I would be like all these other saps that pop in linux help channel on IRC and ask "Can I ask a stupid question".'
Why do newbies need your forgiveness? Have they committed a crime against you, specifically, or against the community in general? The answer, of course, is NO. Newbies who incur your annoyance are doing only that - annoying you. They are people sharing the same virtual space as yourself but without the skills to move as quickly or as adeptly. In that sense they're kind of like bikers or pedestrians or even new drivers - except luckily, newbies can't cause traffic accidents. You have a choice in your reaction to them. You can blast the horn, give them the finger, or yell at them to get out of the crosswalk. Or you can be a polite citizen and be patient or help the little old lady across the street.
At the very least, I'm asking you to ignore them, because unless we WELCOME new members to our community, it will DIE. Not everyone was born knowing how to use computers and people who are making the effort to learn deserve patience. Even if they go to the help channel to ask their question instead of leafing through an intimidating manual (what a crime).
I'm sure this is also because the hard sciences are seen as just that - hard, and the people involved in the discipline have a certain vested interest in maintaining that image. If just anyone could major in physics, math, biology(at my school, one of the most highly dropped and difficult majors) etc., then the (insert hard science here) people wouldn't be able to sneer at all the Human Ecology majors. Perhaps not a conscious motivation - but, as Barbie says 'Math is Hard!!'
Slashdot Mirror
Actually, Legos are Danish. Legos are Denmark's largest export product, followed by dairy products and herring. Notice the lack os an s on herring. Herring is one of the real unaltered plurals in the English language.
That's very true - and a lot of what I said might not apply to specific situations. I'll bet there are rules of thumb for valueing web sites that I don't know about. And if, for example, your teeny company had a great product or held a valuable patent, you could expect to get a lot more and the price would have a much lower relationship to earnings. But web sites don't usually have products or patents (usually....groan).
That 3 to 5 number is a rough rule of thumb. Usually things just work out that way. The problem with 'normal' multiples such as Yahoo's, is that they aren't normal. The valuation a company has on the stock market has little or no connection to the valuation process a prospective buyer goes through when considering the purchase of a company (that is, a buyer who knows what he/she is doing).
In calculating the value of a small business especially, you have to remember one thing: the buyer, any buyer, is in it for the money and they will consider primarily the return they will get on that money when deciding how much to offer for a business. Leaving aside synergies, etc. let me lay this out very simply, lord knows it took me a while to understand it: A buyer has, say $500,000 to invest. He has several options on what to do with it. He could invest it in the stock market - pretty good investment, these days. He might expect to get 15% to 25% back on that money every year depending on what stocks he picks. Or he could invest in bonds and get 10% a year. Now why would any choose to get 10% a year instead of 15%? Because bonds are much safer than stocks. You invest in the stock market, you risk all sorts of nasty things happening to your money. For whatever reason, our hypothetical buyer is considering buying a business with his money instead of stocks and bonds. Buying a business is extremely risky. Businesses fail all the time. For that reason, a buyer demands a very high rate of return. They will expect to get around %17 back yearly on their money.
How is this calculated? It involves a lot of fiddling with financial statements and predictions about the future. But let's assume for the sake of this example that the web site cited above had earnings of $20,000 last year. Let's assume that profits grow 15% a year over the next five years. That means in 2000 it will make $23,000, in 2001 it will make c. $26,450, in 2002 it will make $30,417, in 2003 c. $35,000, in 2004 $40,000. Total earnings over the next three years: $134,150.
Return to the 3-to-5 times earnings multiple. Consider the high end - 5 times earnings. If our buyer invested $100,000 in the stock market and got an ROI (return on investment) of 15%, he would earn $152,000 in the next three years. So why should he pay $100,000 for your company and lose $17,000? He'd probably want to pay a good deal less for it.
There are always strategic fits, synergies, and 'potential' that might induce a bueyr to pay more than the strictly financial value of a company. But don't count on it. If it's a publicly held company, you might think they have tons of $$ to throw around, but if they pay you 20 times the value of your business, they will have to explain it to their shareholders. And sure, maybe your website has tons of 'potential'; but how much money are they going to have to spend to realize that potential? They need to spend a ton of money on advertising and expanding the site? That will affect their ROI significantly. Your users might call you a sell-out and desert you? High rate of risk - they will want a higher ROI.
That was a lot more complicated than I wanted it to be, but you get the picture - it's a complicated scenario, there are a lot of factors, but anybody with enough money to want to buy your company is going to know what's up and they will not want to over-pay.
I think you mean Sales rather than earnings. Sales is your gross income whereas earnings are what is left over after you deduct all your expenses. Yahoo (YHOO) trades at a p/e of 1719 but the p/s is 159, a much smaller number (source).
Nope. I meant earnings, NOT sales. earnings = profit. Usually in an acquisition, the figure that is used is EBIT or EBITDA (earnings before interest and taxes, earnings before interest, taxes, depreciation). The reason for this is simple. Profit margins vary considerably. Say you were running a trucking company where you had $20 million in sales and your profit was $500,000 yearly. Now compare this to a distributing company with high profit margins that has $1,500,000 in sales and makes $500,000 in profits. Now consider how much money a buyer would get out of these companies if he bought them - the exact same amount, $500,000 per year. Why would he pay more based on the volume of sales when that number does not translate into an increased return on his investment?
20x earnings is an absurdly high multiple for any business. The problem with this discussion is that you are comparing this web site to the market valuation of public web sites - also absurdly high. Typical valuations are at 3 to 5 times earnings. Given that this site is grossing $20,000 yearly, I'd say an asking price of $650,000 is off by a factor of ten at least. Think about this logically. Any buyer is in this as an investment. If they aren't getting a good rate of return, why not invest in a mutual fund? 'Potential' for huge future earnings is all very well, but you have to consider where those earnings will come from - probably their financial investment in the site - and whether or not your website has any more potential than the 100s of other similar websites.
You might be able to get more money by structuring some kind of earnout, where your compensation is linked to some specific performance index.
Sorry to contradict you, but one other, more important right based on age has lowered - the right to vote used to 21! Now it's 18. This seems to me to be a much more important right than buying (not drinking, as you stated) alcohol.
Nothing wrong with gross generalizations - except that the ones you make are incorrect. What data do you base your assertion that Female gamers get hooked on games that they just find lying around, like Solitaire and Tetris on? It takes corporations $$ on market research to determine the methods whereby various consumer groups make purchases.
They enjoy that type of game, which tends to be pure game and not an exciting assault on the senses, nor a simulate fantasy.
This one might be true - but it's a totally different premise from your previous statement about HOW women buy games. Method of shopping not equal to type of purchase.
How could you advertise to a market like that? Why would they exert the effort to look for another game when they've got a perfectly good one in front of them? How could you even describe the added enjoyment without letting them play the game?
It's hard for me to describe how much this statement offends me. Are women incapable of the abstract thought necessary to grasp these concepts? Gee, you mean even though I already own one game, there's another game out there that I might like too? Amazing!!
I see no reason why games - especially the thinking games so many people on this thread assume are what appeals to women (news flash - can't stand 'em myself, and all the people I knew who owned MYST were guys) can't be advertised and marketed to women in the same way as books.
Should we be concerned that entire social groups - women, newcomers - don't feel welcome here?
Sorry to contradict, Jon, but I don't feel unwelcome 'here', not sure what definition of here you were using right then. Neither on Slashdot in particular or on the Internet in general have I felt unwelcome.
Having lived in a cooperative, I have some experience with arbitration methods similar to some you discuss. Trust me - they don't work. Sooner or later, they always spiral out of control. The only solution is to IGNORE 'EM!
I really have to ask, does anyone know is SPAM profitable? Are these just un-informed idiots that really don't know that they're wasting their time? Does anyone have information on this?
Furthermore has anyone even _heard_ of someone that bought something because of SPAM?
I've received SPAM that I believe to be quite profitable and which probably attracts a large number of users to the sites being advertised. My e-mail address is listed on several business brokerage sites, and every day I get e-mail advertising new sites. I don't visit them because SPAMMers must die ehm, I mean, I don't support their use of that advertising medium, but I bet lots of other people whose e-mails are up on similar sites would. This is targeted SPAM and not quite the random stuff you're talking about, but....
For an example of a potential mouse replacement, read this article from ABCNEWS.
I think the law has to treat the person who uses a product for illegal means as the "guilty" party. The person who makes it bears no automatic culpability.
This is my general take. Gun manufacturers are not responsible for murders committed with guns. Now, I'm not a gun nut, but I think this is legally right.
a)class action lawsuits are now under way against several gun manufacturers.
b)cigarette manufacturers
c)LAW is a seperate issue from responsibility. I think in any crime, there may be people who bear responsibility for the crime whom the law should not pursue.
d) Responsibility is a renewable resource. An individual is 100% responsible for his actions; that doesn't mean other people can't be responsible too.
One thing that I've noticed is that if an author writes a Star Trek book, they tend to be dismissed by 'real' SF fans unless they've a track record outside that genre.
Not to criticize Blish, who has written some excellent work, but 'real' SF fans, or any other kind of fans, tend to dismiss authors who write crap(pulp). Have you read Blish's ST novelizations? Crap. I don't see anyone dismissing, say, Peter David or Diane Duane for writing ST books. Because they were good books.
(My first-date test? I unlock the passenger door for her. If she leans over and unlocks my door, that's a Good Thing. Otherwise, well... it's generally been downhill from there.)
too funny. Did you know that 'Mars & Venus on a date' specifically tells the woman NOT to lean over and unlock the driver-side door for the man on a first date? Of course, you may not be wanting to date the kind of person reading those books anyhow....
Most people gamble with coins, not chips, and they gamble at slot machines, not tables. Slot machines can be the traditional one-armed bandit. But don't forget the computer poker machines. These are mostly very low-tech, but there are some great touch-screen video-poker games with sophisticated graphics. I don't usually emjoy gambling, but I play them for the pretty graphics and the sound effects, no joke.
Ob rant - I live in California, and they have a state lottery. There's no ban on gambling, just a state-run monopoly.
not too sure about the reasoning on this one - if you blew $70K in Vegas, you would be sitting in a big hotel, having gone to the trouble of travelling there; you would have gone and exchanged your cash for chips (and you would have had to obtain that money in advance, as I doubt casinos would give most people much credit); you would have sat at a table, putting piles of chips onto a board (or whatever) and watched them pulled away from it as you lost. This is all physical, understandable, and there.
Ok, now we cut to online gambling. A user sits and plays what is in effect a video game - just like they have been playing since they were kids. they click buttons, they toggle lights, and when they click the right or wrong button, numbers appear on the screen
""OK. The idea that, right off the bat, evolution shouldn't be taught because the Bible says the world was created in 4004 BC is just batty. Especially when one stops to consider that what appears in the Bible as "day" really means "period of time," and with a few minor exceptions the order that things were "created" in is a pretty good match for evolutionary theory. I also think that the theory of evolution is the best one out there.""
For a review of the whole debate, including the arguments outlined above, check out The Talk.Origins Website.
'I am tired of this attitude that because people are newbies we need to "forgive" them. The whole point of RTFM is that no one ever does. Im glad I was told RTFM when I was first getting into Linux, because if it weren't for that I would be like all these other saps that pop in linux help channel on IRC and ask "Can I ask a stupid question".'
Why do newbies need your forgiveness? Have they committed a crime against you, specifically, or against the community in general? The answer, of course, is NO. Newbies who incur your annoyance are doing only that - annoying you. They are people sharing the same virtual space as yourself but without the skills to move as quickly or as adeptly. In that sense they're kind of like bikers or pedestrians or even new drivers - except luckily, newbies can't cause traffic accidents. You have a choice in your reaction to them. You can blast the horn, give them the finger, or yell at them to get out of the crosswalk. Or you can be a polite citizen and be patient or help the little old lady across the street.
At the very least, I'm asking you to ignore them, because unless we WELCOME new members to our community, it will DIE. Not everyone was born knowing how to use computers and people who are making the effort to learn deserve patience. Even if they go to the help channel to ask their question instead of leafing through an intimidating manual (what a crime).
I'm sure this is also because the hard sciences are seen as just that - hard, and the people involved in the discipline have a certain vested interest in maintaining that image. If just anyone could major in physics, math, biology(at my school, one of the most highly dropped and difficult majors) etc., then the (insert hard science here) people wouldn't be able to sneer at all the Human Ecology majors. Perhaps not a conscious motivation - but, as Barbie says 'Math is Hard!!'