Category: Finance

Did you build it?

Posted on by Steve Sammartino

Did you build the website? Yes

Did you build your blog? Yes

Did you design the property development? Yes

Did you renovate your house? Yes

Did you launch the product? Yes

Did you manufacture the product yourself? Yes.

Did you landscape your own garden? Yes.

Did you make that advertisement? Yes

Did you self finance the business? Yes

Yes you did all these things, and more, every bit of them. You orgnaised the project, you had the idea, you got the finance from the bank, you conceived it and you made it happen. Never mind if the advertising agency made the creative, the PHP programmer coded your website or the bricklayer built the house.

You did it with your mind, your management skills and your ability to execute the project. None of it would have even started without you.

So whenever anyone asks if you did it? You say “Yes”.

Business valuations & Facebook

Posted on by Steve Sammartino

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:

  • Facebook has a revenue of approx $100m per annum. 

  • Although profit is currently undisclosed, even a generous 50% profit on sales margin would result in a diminutive profit of $50 million.

  • This would result in a PE ratio of 300 times!

  • 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.

Self help books

Posted on by Steve Sammartino

Self help books are great. How to books are great. Blogs are great.

 

In fact there is probably no better way to learn how to do anything, improve our life and achieve our goals. But at some point we need to put the books down, and resist the temptation to buy another one when next browsing through the local bookstore.

We have to implement instead.

Every book on entrepreneurship, finance (insert topic here) has a slightly different spin – the next big idea. One which could change our thinking and even tempt us to re-do our plans. It’s at this point we need to test things in the real world. The only thing more valuable than planning and learning is doing. If things don’t work, then we can go back and look at another theory or method.

So let’s all turn off our computers, stop reading (writing) this blog and get out there and implement our vision. Good bye, and good luck.

Entrepreneurs wages

Posted on by Steve Sammartino

It’s easy to get dispirited while working very hard on a start up business, yet at the end of the week there’s no wage.

 

Here’s a way to view the situation:

 

We’re earning more than we’ve ever earned before, we just haven’t been paid for it yet.

Quote

Posted on by Steve Sammartino

Collingwood Football Club president Eddie McGuire offers this retrospective on cheque book recruiting:  

“I’ve never seen anyone who won the lotto become *Kerry Packer”

*insert revered businessperson’s name here… 

eddie-mcguire.jpg 

Entrepreneur lesson:

Hoping and luck is never the same as learning, creating and building.

Unnecessary Costs

Posted on by Steve Sammartino

Business advice often given to entrepreneurs is how to protect themselves and their business. Think company formations, insurances, trademarks, partnership deals, business names et al.

 

These are all very costly for a start up. It’s often better to leave these things to the last minute. It’s easy to get excited and just register everything possible so you own all the relevant IP. That way your best friend and business partner Joe can’t steal all your personal assets….

 

Do it later. Any money spent which isn’t directly going to generate revenue can wait. There is nothing worse than wasting valuable cash on protecting business that never got to revenue.

Once we’re up and running it’s a great investment. But not in the early days, or during the pre-revenue period.