Sorry. I cannot handle it anymore. Let’s shake everyone awake shall we? We are not living in 1997 anymore. WAKE UP!
What I am talking about is dealing with companies that, well, categorize themselves as being the next best thing, living in a world of unlimited capital and that we all will become millionaires. Because somehow a lot of IT people or CEO’s in the IT-business, still seem to think that way. At least a couple I know of.
Recently I was talking with the owner of a small company, who indeed mentioned that he was looking for a buyer of his company and would not accept any less than a check of $32 million dollars. That’s right, 32 with six zero’s. I was amazed, because three months ago he was mentioning he wanted to have at least $7 million for it. So, let’s find out… why so much money? What is the golden goose this company has?
Well, that’s the problem. It doesn’t have any. They run a website that retrieves only a couple of thousand visitors per month, and their database of registered users contains only thousands of users, and ‘thousands’ in the single-digit range, and not even the high-ranking ones. Not only that, it is so closed up with the privacy agreement, that if someone would buy it, they would not be able to sell this information (which I don’t support anyway). Then they have a store that does not sell, and I mean, it literally doesn’t sell a single product.
There are some good things in the company too. But not worth $32 million dollars. Not even $3.2 million. Put it against the current price and the system that they use that is too customized to their own goal, I think the worth of the company is about $600,000 .
Of course this person didn’t like to hear this, but it is the simple truth. The time you could sell a small IT company simply because of it’s knowledge is over, unless you really have something so unique. But if you don’t, then you don’t. I utilize quite a unique system in my own company, one that is worth quite some money. But when I say that, I mean about $250,000. Simply, because it is unique to me. For me it is potentially worth about $800,000 – $1,200,000 at this moment. But the word ‘potentially’ is in there. I don’t know. The worth is that with the technology that I have I can massively create custom made really unique (and with unique I mean that they all have their own real identity) web productions, and compared to the standard development time, I can make them a lot faster for a lot less money, still making a nice profit.
Sounds good. Works amazing in a sales pitch. But I am not a sales person. I am looking for one to sell it. And as long as I don’t sell it, the technology is worth the production price with and production value. If I don’t make any products with it, or when I don’t sell it or the company, it is worth absolutely $0. Worse, it is worth less, since it only costs me money to maintain it, and keep it running. But you know what, I likeworking on it, making my small number of productions on my own for clients. It is for me what for you working on a bike, hiking, traveling etc. might be. And for me, that makes the worth priceless. Ah, let’s put a hidden commercial for a credit-card company in here 😉
So, then I look at this other company, and see it’s $7 million debt. I then understand the older price of the company, resulting in the owner to be debt-free after a sale. But since that time, the number of registered users hardly went up, not as much as the debt. So I try to figure out the number of $32 million. I am sorry, even by programming 20 bugs deliberately into a calculator-program I cannot make that happen.
Let’s get real here, okay? Enjoy your company, take pride in your work, your brand and productions. Have a good time, and make a good living. If then at one moment you can sell for a lot, do it, if you want to. But don’t set it up as a cash-cow. There are people who can do it, and we all know a friend who did, but looking percentage-wise, chances are that we are not those people.
If you are, and you would like to disagree with me, ah, let’s talk! Because if you are such a good salesman (or saleswoman), I absolutely need you! 🙂