I'm trying to figure out if you're just being a jerk here, or whether you are genuinely curious about a question with a wide range of acceptable answers. I hope it's the latter.
Market rates are typically something between 2x and 5x some sort of revenue or profit measure.
That said, the price can go over 5 if there is a big strategic advantage to be had.
Conversely, the multiplier can be measured in months if there are some red flags -- bad management, suspect financials (e.g, lots of charge backs, excessive debt, cash flow mismanagement, etc.), suspect marketing activities (e.g., janky backlink profiles), evidence of black hat / gray hat activity, publicity issues, etc. Sometimes folks just want to sell these to get away from them, and they are willing to offer the right price. Is offering a 12 month revenue/profit multiple or lower bad here? I would say potentially no.
Also note that some people are motivated to sell for some reason. If you've got cash on hand, they will sell for less.
Anyway, whether you intended to or not, this sounded like a snarky reply. Much has been written about markets for small companies, so blithely challenging someone on HN seems inappropriate.
On the other hand, if you do know someone who has an unconditional open offer to buy businesses at a specific multiple of revenue, please let me know. I can hook them up with as much as they want. I'm fairly certain that this is not the case, but I think it is prudent for me to ask.
No I am asking a genuine question. My experience is all buyers want to pay 1x to 1.5x of the after tax profit after some massive owner salary has been subtracted.
From a financial perspective it almost never makes sense to sell unless you have to get out today. If you have a good business that is earning good money then just run it out for cash. At worst take your best employee, give them 10% of the business, and let them run it.
Some prospects have that understanding of what is reasonable, just like some startups really think they can find experienced engineers in SFBA for $60k and 10 bps, but the actual buyers who successfully consummate transactions definitionally do so at market prices, and market prices for small SaaS apps are 3~3.5X SDE (approximately profit w/ no deduction for taxes or owner salary), with deviations above and below based on individual circumstances like you would expect for any complex sales.
I've done it twice. FEI (the broker I used, linked by others) was very effective at bouncing people with very unreasonable expectations of market prices; I felt like my time was not wasted with non-serious parties (relative to my prior expectations of how many there would be).
This hasn't been my experience at all - I'm sorry you haven't had better offers. If you haven't already, I suggest contacting the brokers mentioned on this page (FE International, Pixel Paycheques) and see if they can get you better deals
I am not really looking to sell, this is just my experience of approaches I have had. My favourite was the offer I got which came with a three year earn out that was half my expected profit over the timeframe. Really.
>>From a financial perspective it almost never makes sense to sell unless you have to get out today.
On the contrary, you should never wait to sell until you have to. That just puts you in a very weak position and ensures you'll be selling it for pennies on the dollar.
