Business valuations & Facebook
The recent deal where Microsoft took a 1.6% stake in Facebook for $US240 Million valued the company at $US15 Billion.
Here’s some numbers:
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Facebook has a revenue of approx $100m per annum.
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Although profit is currently undisclosed, even a generous 50% profit on sales margin would result in a diminutive profit of $50 million.
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This would result in a PE ratio of 300 times!
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Which means, it will take Microsoft 300 years to pay back their investment.
Start up blog view: This could be the most ridiculous sale price anyone has ever paid for a company.
Has everyone forgotten about these start up web 1.0 heroes of the late 1990’s and early 2000’s:
kozmo.com
Global crossing
Worldcom
govWorks.com
eToys
Boo.com
Pets.com
theGlobe.com
Where Investment banks and reputable companies such as Microsoft paid exorbitant prices for many now non-existent companies with zillions of page views, sessions and ‘potential’?
It’s different this time, right?
At some point in our journey we all have to value a business. So we must remember the following:
When selling: Potential, emotion and short memories can get you a great price
When buying: Forget ‘potential’ and focus on ‘current’ earnings and investment payback period.
Bonus conspiracy theory: Microsoft really bought the personal information of the 42 million active Facebook members.
Fashion and Function
Below is a picture of a ‘brand on fire’- Crocs. The basic summary is Crocs are a highly functional rubber sandal which are really very comfortable.
They have really caught the imagination of the public. But the thing about crocs is that in real terms, they’re pretty ugly shoes. Not very sexy at all. Nothing compared to other sexy consumer products like the ipod or a bottle of San pellegrino. They look a bit like hospital theatre shoes.
But Crocs have made their way into an every day fashion. Love them or hate them, brand ambassadors are now wearing them for their ‘cool appeal’. They’ve become fashionable on beaches, city streets, sailing decks, at swimming pools, cafes, sporting events, as in home slippers and surfers are wearing them to hop over rocks to their favourite reef break. We even see pairs matched up with socks in winter!
The thing is, Crocs work. They really have a multi purpose usage which sandals, thongs, or runners don’t. They grip, they’re water proof, they fit nice, they don’t cause blisters, they absorb shock, they protect and they last a long time. I can’t even begin to imagine how big the profit margins are on Crocs. But the recent range proliferation tells me that it’s substantial – check it out here, or in your local Crocs store to be blown away.
Start up lesson:
If you want to be ‘fashionable’, focus on being ‘functional’.
The 5% rule
Five percent of the people we meet simply like to be difficult. They can’t be sold to, convinced, enlightened, managed or taken on any kind of journey. They might be customers, consumers, buyers, retailers, developers, employees, colleagues or anyone in our start up value chain.
Words to describe these people often include:
Obstinate
Arrogant
Rude
Apathetic
Dismissive
(insert negative adjective here)
No change in approach will change this fact. We didn’t make a mistake, we weren’t unprepared. It just is. We need to accept it and move.
Success is about people and numbers.
What we need to be aware of is if the 5% grows and becomes 10% or even 20% of people….. then it’s time consider whether we are on the wrong side of the 5% rule.
Quirky fact 5.0
Until 1851 Brittan had a ‘window tax’.
Theory being that wealthy people have more windows. It was eventually replaced by council tax. Legend says the term ‘daylight robbery’ came from the taxation. Many homeowners would brick over their windows to avoid the tax.
Now British property entrepreneurs find houses with the bricked over windows and shed some light on renovation profits!
Crazy John
Yesterday a great Australian entrepreneur ‘Crazy’ John Ilhan passed away. I won’t replicate the many newspaper articles about his life or fortune. You can Google him to see all of that. What I will point out is the many personal qualities he was documented as having:
Self belief
Highly motivated
Family man
Big ideas
Philanthropic
Risk taker
Failed quick, failed often
Bootstrapper
Game changer
PR machine
Knew how to dance with gorillas
– Telstra in his case. (topic of coming blog entry)
At the age of 41, it reminds us of the most important thing of all – our health.
Number 1 tip for web entrepreneurs
GO OUTSIDE !
Sounds ironic or even slightly crazy. But here’s what we must consider.
We are not really in the ‘online’ business. We have a business which just so happens to have an ‘online’ presence.
Itunes is in the music business
Ebay is in the second hand (new) goods business
Google is in the advertising business
McDonalds is in the real estate business
Wikipedia is in the democracy business
Everything is not what it seems. The best opportunities are out in the world where our people are living their lives. The best ideas come from conversations we have, not spreadsheets we do. The best way to engage business associates and customers is to meet and interact with them…
…The best way to market to our world is by being in it, not isolated from it.
In the words of marketing polymaths Reis & Trout: “An office is a very dangerous place to watch the world from”
Cut through v2.0
In March of this year I did a post on a small business gaining some cut through which you can see by clicking here.
And just yesterday local water manufacturer ‘Another Bloody Water’ had a delivery truck driving around with the entire truck covered in grass, which can be seen below.
In the middle of a concrete grey city you know it turned heads and had plenty of cut through.
I know a trend when I see one!
