Saturday, September 13, 2008
If you want better multiples when valuing your firm, you need a larger sized firm. Studies have shown that smaller websites and web-based businesses sell for lower multiples (between 0.5 and 2 times revenues) whereas larger websites/web-based revenues sell for 3-10 times revenues. Yes, there are still some businesses that sell for as high as 9 or 10 times revenues. A security software firm sold for 9 times revenues in 2007. A game & entertainment software developer trades for 33 times revenues even in these depressing markets. Bottom line is that there is still value to be discovered and better values to be got by building the right mix of business. For start-up firms, it is better to look at a strategy of building larger businesses as your exit multiples would be a lot higher.