Ask HN: How to determine the value of this company?

6 points by mhkool 5 years ago | 5 comments

The company has what I consider a valuable asset and therefore I find that the determination of the value of the company cannot be solely based on turnover/profits.

The company exists for 15 years, is run by two persons and the yearly sales of URL filtering solutions is less than USD 250,000. The assets are a URL database with 53 categories and content categorisation bots with two AI engines. The URL database has "only" 16.9 million entries but covers 99.77% of all URLs used by a large Telecom in the USA. The coverage percentage varies; it depends on country and client type and is for some clients 99.90% or even 99.99%.

We consider to sell the company and start a new business in agriculture. The "burning" question is how to determine the value of the URL database and the categorisation bots, and ultimately determine a reasonable/just asking price for the company.

Thank you for suggestions.

bruce511 5 years ago |

The asset either has value, or not, depending on how you use it to extract value.

Let's say I have a car. Its value is in getting me to the beach. It has x value to me. Someone else sees the car and imagines getting to work, making money as an uber driver and so on. If his perceived value is higher than my value then its likely we can find a price to agree on.

In the same way a business has value according to current revenue and profits. You may have unutilised assets with potential, but that raises the question of why the value is unrealised.

In other words, buyers pay for what is, not potential. They look for potential they can exploit, but (except in rare cases) they don't _pay_ for potential, since that is their profit. (and if the potential is in fact an illusion that would be a loss.)

If you feel an asset has potential, then by all means exercise that potential, increase the profits, and the business value.

(aside: sometimes an asset has value that a buyer is uniquly able to realise, that you cannot. In this case expect around 25% of the actual value to figure into the purchase price.)

rahimnathwani 5 years ago |

Look at Flippa for benchmarks, and contact FEI International for an appraisal.

Most people will evaluate the company based on its revenue and margins. If you think the assets have potential value outside this, e.g. for another type of business, then maybe just try to make a deal rather than sell the business?

FWIW I'm skeptical about any % coverage claims, because nowadays a large portion of traffic is encrypted. So unless you have cooperation from the browsers (e.g. a browser extension, or a certificate installed to allow MITM), you cannot calculate the denominator.

mhkool 5 years ago | |

Thanks for the pointers.

The coverage is calculated by DNS servers and web proxies and can only be incorrect if circumvented. The web proxies are almost all in corporate environments where they cannot be circumvented. Only a tiny fraction of HTTPS uses a TLS1.3 extension to encrypt the FQDN of the web server - the rest of the HTTPS traffic can be monitored.

rahimnathwani 5 years ago | | |

DNS gives you only hostnames, not full URLs.

Snooping TLS to get FQDNs gives you only hostnames, not full URLs.

Over 50% of the top million web sites automatically redirect visitors to HTTPS. Any URLs can only be read if you can install software or your own certificate on each monitored endpoint.