I Recently Sold a Company on MicroAcquire AMA

I recently did an interview with Acquire.com on my experience buying and selling a company on their website.

One tip I share in the interview is how to properly value a company.

Most of the time, we value companies based on a multiple of revenue. Eg If a company makes 10k/year and we give it a 3x multiple, then the company is worth 30k.

However, for smaller companies this is actually a mistake because it doesn’t account for the value of the IP itself. Especially at low revenues, the code and IP are worth far more than the revenue it generates.

So the proper way to value a company, especially if it doesn’t make that much money, is to ask these two questions:

1) How much would you pay for this company if it made 0 revenue? 2) Then add on the revenue multiple on top of your answer to 1).

And that’s the real value of the company.

In full transparency, I didn't make much on the acquisition, maybe $15k from the acquisition + revenue which I had to split with a partner and to cover some costs. But it was still an experience.

If you have any more questions on buying and selling companies, I’ll answer them below.

My full interview is here: https://acquire.com/blog/how-to-buy-and-sell-a-saas-business...