How do you value your side project ?

by 𝙈𝙄𝘾𝙃𝘼𝙀𝙇 𝘼𝙉𝘿𝙍𝙀𝙐𝙕𝙕𝘼

In case of selling your side project:

How do you decide the price?

I am really curious...

Thank you.

𝙈𝙄𝘾𝙃𝘼𝙀𝙇 𝘼𝙉𝘿𝙍𝙀𝙐𝙕𝙕𝘼

on November 23, 2019

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Pricing is always 2 things:
1. Cost based - how much did it cost you and how much do you need to profit. (Production systems)
2. What's the precived potential.
  This is hard, easier with more mature business that have history, income, and predictability...
  Let's say for 3 years it generates x$ with y% growth per year... So you take some multiple on that.. could be 3-7x on small boring business.
  Could be like 100x on high growth business that goes to IPO 😅.
When your precived value on how much you can make if you keep it vs doing something else with the money is lower vs what another party precives it can generate with it / reduce alternative cost to him, you got a sale 🏆

You can look at flippa for deals..
hatkyinc

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7 years ago
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  Ah, ok. So in theory with the first reason point you can make 99% profit if done right or if didn't have the need to spend almost nothing...without counting your own time worked on the project.
  
  What if it's a small startup generating 0 but with proven potential to generate? In less than a year.
  
  So regarding the last, the sale,sounds fair, but it can be difficult if the other part does not perceive the same as you. That part can be tricky...
  
  I am going to look in flippa to see examples.
  
  I don't know what to do with Colors & Fonts to be honest.
  
  Thank you for taking the time to explaining it.
  
  𝙈𝙄𝘾𝙃𝘼𝙀𝙇 𝘼𝙉𝘿𝙍𝙀𝙐𝙕𝙕𝘼
  
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  7 years ago
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    What if it's a small startup generating 0 but with proven potential to generate? In less than a year.
    It's super hard to sell a vision.
    The more you can show from a vision, the easier it is - from text, to mocks to MVP, to numbers...
    It's even harder to sell a vision when the person selling does not want to be part of that vision anymore - that's why selling ideas is super super hard..
    The times this work is when the other side sees a better vision than you do basically.
    
    So regarding the last, the sale,sounds fair, but it can be difficult if the other part does not perceive the same as you. That part can be tricky...
    Yep.
    
    Ah, ok. So in theory with the first reason point you can make 99% profit if done right or if didn't have the need to spend almost nothing...without counting your own time worked on the project.
    While we do it for simplicity at times, discounting your time is like giving away the only thing you have which you can never get back.
    Yes you can in theory make close to infinite returns on an enterprise, that's how people get to the ultra rich bracket.
    The biggest levers you can use to get close to infinite results is use OPT and OPM - Others peoples time and Others peoples money.
    But in no way is that to say it's anyway easy. That's the startup world for example.
    
    hatkyinc
    
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    7 years ago
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    1. 1
      
      It's super hard to sell a vision.
      The more you can show from a vision, the easier it is - from text, to mocks to MVP, to numbers...
      I understand this and it makes sense:
      
      it's even harder to sell a vision when the person selling does not want to be part of that vision anymore - that's why selling ideas is super super hard
      The times this work is when the other side sees a better vision than you do basically.
      I guess this is the psychological part and this you know it happens when you are running your side project without intentions to sell it and they approach you to make a deal if I am not wrong?
      
      While we do it for simplicity at times, discounting your time is like giving away > the only thing you have which you can never get back.
      In this case, it will always have a "considerable price" if the side project is viable taking into account our time.
      
      Yes you can in theory make close to infinite returns on an enterprise, that's how people get to the ultra rich bracket.
      The biggest levers you can use to get close to infinite results is use OPT and OPM - Others peoples time and Others peoples money.
      
      Isn't this YCombinator?
      
      Thank you again
      
      𝙈𝙄𝘾𝙃𝘼𝙀𝙇 𝘼𝙉𝘿𝙍𝙀𝙐𝙕𝙕𝘼
      
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      7 years ago
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        I guess this is the psychological part and this you know it happens when you are running your side project without intentions to sell it and they approach you to make a deal if I am not wrong?
        It could happen.
        I think the more likely case is when the business is build with a target company buy in mind either a specific one or a category of such. One can also seek a strategic buyer after the fact.
        Maybe think of it like the inventor, that know he can design a better mouse trap or solve something a normal product misses, and don't really want to build a full product, just the prototype and patent and go and licence it to a business that already deals with these products.
        In business commonly people talk about vertical / horizontal M&A, meaning either you'r a supplier or your an upsell that's an additional side product as examples. lets say you are adding a wheeled trolly for a washing machine company. They can make more selling your product as an upsell than you would ever sell aftermarket.
        
        Isn't this YCombinator?
        YCombinator is a startup accelerator.
        OPT is basically hiring people. (can be other buy options like contractors or products)
        OPM is investments and/or loans.
        
        hatkyinc
        
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        7 years ago
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Id like to view it from three points of View:
1. Your minimal selling price
What amount do you need to part ways with the project and still feel good about it? Do you need the capital for something else?
1. The cashflow value
Without any emotions 2x to 7x your average profit of the last two years. Depending on the processes and systems you put in place to make it run without yourself doing any Work. Just for someone buying it as a "passive" investment asset.
1. The "build or buy" value for the buyer
Depending on why one is buying your thing and what they plan to do with it the value can vary massively. So find the why of your buyer.

Example: a buyer is only investing in the cashflow of the asset but has ideas and skills to potentially double the current profit (doubling prices, SEO skills, owns a matching sales channel to target group, etc.). Maybe he is planning to earn back his Investment in 3 years. Best case in 2 years. Any purchase price below 3x would be a great deal for him. Given his plans to double profit he would probably be ok with a 4x or even 6x price.

Example: a buyer / competitor is thinking to build your thing themselves or buy it ... you can estimate the dev cost + marketing + sales to your current customer base + time to market is now zero. So much more perceived value (completely independent to current profit) for the buyer.

Hope that makes some sense to you?
patrics

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7 years ago
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  What amount do you need to part ways with the project and still feel good about it? Do you need the capital for something else?
  This is fine, but shouldn't it be some reality in this? because if I am having a plan to do something with that, but the project is not worth that wouldn't it be really difficult to sell it?
  
  Depending on why one is buying your thing and what they plan to do with it the value can vary massively. So find the why of your buyer.
  So this becomes sell for what it can be and not for what it is right?
  
  It does make sense actually. Thank you so much.
  
  𝙈𝙄𝘾𝙃𝘼𝙀𝙇 𝘼𝙉𝘿𝙍𝙀𝙐𝙕𝙕𝘼
  
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  7 years ago
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