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Comment by tobiasbischoff | Hacker News Reader

No offense, I love Sam, he is brilliant and cheddarapp is fantastic. But from a business side of things: Who in their right mind would buy a $12k/year revenue business for $125k?

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My feelings, too. I can understand why Sam feels it's worth $125k, based on the amount of hours he put into it, but a potential buyer will (most likely) evaluate this as buying a business -- and from that perspective the price looks really steep. You'd need to grow the business 10x just to break even.

That being said, there might be someone out there who's been contemplating building a task app business, and this would give them a really nice head start, product-wise. Or, perhaps it would make sense for a larger company (OmniGroup? Panic?) who can devote substantial marketing resources to it.

Nonetheless, I wish him the best of luck. He's a likeable guy and has obviously put a ton of love into this product -- it would be nice to see him enjoy some monetary return on his efforts.

I could see criticizing the price, but the reason you guys are criticizing it for are ridiculous. If you buy a company for 125k and make 125k/year in revenue you dont break even, unless your expenses are insane or if you think the business can't last more than a year.

The person who would most likely buy this app is maybe a company that thinks they could bring the revenues up, integrate this into something theyre working on, and add value. Is it worth 125k? I don't know, but I imagine we will know soon.

I guess my main point is that Sam seems to be setting the price based on what Cheddar is worth to him personally, rather than some kind of growth/potential calculation (or so I assume -- he doesn't go into how he arrived at the $125k price tag, aside from alluding to the number of hours he put into the project). That makes a harder sell, IMO. Buyers are going to look at how much potential Cheddar has as a business, not how many hours Sam put into it.

BTW I'm not suggesting this is the wrong way to sell it -- if it takes $125k for Sam to feel OK parting with Cheddar, that's totally valid.

Fair enough, I just objected to the idea that one needs to have revenues=value to "break even". Just the complete wrong way to think about it.

I don't wanted to say that it should make 125k a year to make it valuable. But the ratio has to make sense. Just compare to the Sortfolio Sale: 120k rev/year sold for around $450k, makes far more sense. (http://37signals.com/svn/posts/2899-sortfolio-deserves-a-bet...)

Facebook bought a $0/year revenue business (Instagram) for $1B. :-)

If I recall, this is the same fellow who wanted to charge some astronomical fee for iOS project consulting. I suppose this strategy has paid dividends before for him?

Obviously not.

No, that was Mike Lee.

http://soff.es/one-thousand-dollars-an-hour

Ha, didn't realize he did it too!

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