How Much is Small Software Business Worth?

One colleague of mine asked me a question – “I have a selling software product. How much is this software business worth?” I think I can give an advice.

A small software business can be owned and operated by one person: a developer, salesman, manager, and holder – all in one. This business could be run at home or in a small office. It does not require massive investments to grow up – only a computer, Internet connection, web site, and lots of hard work. Well, you have run it, you are working hard, designing your product, promoting your site, attracting customers – and one day you feel you are rich and tired. You wish to load off your mind and sell your business with potential to grow.

How much does it cost?

Let’s say, for simplicity – you have designed the software title; possess a well-known web site; have a stable income and no registered legal entity, patens, or licenses. You are not selling your permanent assets – computers, developments tools, telecommunications, and the like. You have no other staff but yourself.

Here is a simple estimation formula:

Business costs = (Month net income * Forecasting period) – Holder changing expenses

Month net income = Income – Tax rate – Overhead expenses – Development costs

For example:

You are selling the software for $4000 per month.
You are paying the 20% taxes.

Expenses are $250 per month for hosting, advertising, etc.

You are planning – your software will be selling for the next 3 months without additional design and development. So the development costs = $0, Forecasting period = 3 months.

If you do not have a registered trademark, patens, LLC – your Holder changing expenses and registration fees = $0. So, the buyer spends nothing for registration.

Let us strike a balance:

Month net income = ($4000 income – 20% tax rate – $250 month expenses – $0) = $2950 per month

Business cost = ($2950 * 3 planning months) – $0 = $8850.00

Now, you have the justification for your price.

However, you need a strong argument – why do you want to sell your small gold-mine?

Good luck!

How Much Is Your Home Based Business Worth?

If the electronic energy in your body’s hydrogen atoms could be utilized, scientists have calculated that a person could supply all the electrical needs of a highly industrialized country for almost a week. By this estimate, the average person is worth about 85 billion dollars! Never sell yourself short. You are unique and immensely valuable as a human being. The payments you receive from life are what vary from person to person.

Anyone building a business for themselves is actually building a lifestyle regardless of who signs the paycheck at the end of the week. You hold the office of the President of your own corporation, which makes you responsible for success and failure. The members of your team are the stockholders and it is your job to see that the value of the stock increases in the years ahead.

Even though the operations of a corporation are complex, they can be reduced to four basic functions: Finance, Production, Sales and Research. Without proper financing, there would be no production. Without production you would have nothing to sell. Without sales you would have to stop production. Without research you could not keep up with the changing times. All four of these functions must flow in unison in order to have a successful business. How successful you are in meeting these challenges will determine your present and future growths.

You must be concerned with growth because nothing in this world stands still. A body in motion tends to remain in motion until acted upon by an outside force. A company that is growing has a tendency to keep growing. The same goes for a company that is either standing still or falling backwards. All responsible business owners should be able to look into the future and predict how well they will progress based on their current level of activity. Never before in the history of mankind has an individual had the opportunity to make a brighter future for themselves than now.

Stand back and look at yourself and your future objectively, as an intelligent stranger might. Ask yourself what you are worth right now. What is your value to your business and what is the value of your business in the marketplace? If you were an outside investor, would you want to invest in your company? If not, then change the reason why. Give personal attention to the growth of your business so it doubles in one year instead of eight. Find a timely business model that has achieved what you want and follow it. If you do twice as much, you are bound to receive twice as much. It sounds simple, but 95% of business owners can’t grasp it. Knowledge is power.

Sales is more than selling a product or service, it’s the way in which we sell ourselves to everyone who is interested in what we have to offer. It is the way we get along with our associates, our families, friends and neighbors. One extra call a day leads to 250 extra calls in a year. In 5 years that comes to 1,250 calls that you wouldn’t have otherwise made. A person can triple their effectiveness in less than a month. How have you been handling the four basic business functions? How much time are you really putting into moving forward?

Home based business owners have to be harder on themselves than any strict boss at a regular job could ever be. Yes, the reason we want to work from home is the have the freedom of doing what we want, but we can’t build a business with that attitude. You have to put the time in to set your business up first. Then we have to constantly strive to improve our effectiveness so we never have to worry about going back to being a puppet of the corporate giant. It’s all up to you to make these decisions. It’s the difference between being worth an average amount of money and an above average amount.

Tomorrow is a brand new day. Begin to think of ways in which you can increase your effectiveness.

Funding For Your Business – Worth More Than Money!

Cultivate relationships with established early stage financing sources, through Angel Investors, Capital Finders, or Venture Capitalist. Even if you never raise a dime from any of these sources, as an emerging entrepreneur they are worth to you their weight in gold. In fact, they have something more valuable to you than mere capital. It’s their deal inventory. So what’s valuable about deal inventory?

What’s it worth to you to have first knowledge of the newest and soon to be hottest applications in your field? Could that knowledge give you a huge jump on your competition? Could some new technology enable you to do something no other competitor can now do? Could access to this technology enable you to introduce a new product or service within a time window before anyone else can do it?

I take time every few months to talk with those individuals that I have come to know over the years who have been prolific at either financing or finding financing for companies pioneering new technologies. For the price of a phone call and 30 minutes or so of mutual updating on our current projects, I am consistently introduced to young companies that have developed a technology that can enable me to eclipse my competition.

This past week, I was introduced to a new company with a revolutionary way to digitally color and pattern fabric. They have one name brand account for whom they produce in volume and are hungry for more business. Because of the way they imprint the fabric and fuse dye with material, a clothing designer can economically create clothing designs that would be utterly cost prohibitive under any other existing method.

Imagine the reception by buyers for major department stores when I show them at the next trade show a clothing line priced 40% less than what comparable style and quality would normally cost. What an opportunity to introduce a new line of clothing from a new designer!

And, what if we’re too successful? How do we finance production? We take orders at the trade show for delivery several months later. We’ve lined up the manufacturer ahead of time as well as the lender, a factor and even some small investors. Once we have the orders in hand, everyone is happy and ready to play their part with minimum if any risk.