My sixth year as a bootstrapped founder

Why should a company be assumed to be eventually sold? What the heck is that kind of perspective. The vast majority of small/medium companies are not sold - instead they provide regular income to their owners.

This sounds to me like typical toxic silicon valley startup mindset.

> This sounds to me like typical toxic silicon valley startup mindset.

I think this is naive cynicism, as it were. Lots of companies are started by people who eventually want to sell them, be it after 5 years or 50. Being biased against Silicon Valley won't give you a good handle on this stuff.

So the entire point of a "valuation" is to determine the sale price, right?

You don't need to sell it - you can lend against it or sell part of it.

I don't think it's a toxic mindset but a financially literate mindset.

Sale price is just one possible valuation. Replacement cost is another. Net present value is yet another.

Your question can be rephrased as why should a company be valuated?

Do you not see a point in valuating a company?

Because if you do see a point, how else will you do it without assessing how much someone else would be willing to pay to acquire it, i.e. how much would it sell for?

The vast majority of small/medium companies aren't saleable either. However, building them to be sold, even if you have no intention of selling, makes them more valuable.

Not true at all. The local corner store, laundromat, and plumbing company are usually not something that can be sold easily. If they do, it takes years to find a buyer and they are getting a low sale price.

Tech startups had high multipliers in the past 10 years thanks to dumb money, low interest rates, and lot of hope. Most of those things are drying up and many tech startups that had decent valuations are now worthless.

Ferrero, Mars, Ikea, Ikea and Valve prove that you can get very big and stay private.

Not everyone wants to IPO, or sell to big player.

You may want it to stay in the family, or protect the original culture. Maybe you found someone in your team that will be a great CEO.

Maybe you like that life.

You don't even need to big huge, look at 37 signal.

Further to this, even if you don't intend to sell the company, it's only really worth something besides the salary or dividends you draw for yourself if it is generally in a condition where it could potentially sell.

If it's legally dodgy; if accounting is a total mess; if it relies entirely on personal connections or favors; if tax returns or licensing are a mess; if there is no documentation; if there is no consideration for bus encounters; etc; etc - then it would take major work before it could be sold and it is worth little until that work is done. (Besides the current payouts to the owner which only exist as long as the owner works on it.) That's because if the owner quits or is incapacitated, the company just about doesn't exist anymore.

> The vast majority of small/medium companies are not sold - instead they provide regular income to their owners.

This is true. Most people don't want to buy and run a restaurant, bodega, hardware store, etc.

SaaS companies, on the other hand, are much more attractive to buy. They can be run remotely, often do not require many employees, and can be managed by a team that manages other companies simultaneously.

The author's company falls into a middle ground. Hardware manufacturing has certain idiosyncrasies that make it less turnkey than SaaS. But nonetheless, many of the functions (shipping out units) can be carried out by staff who are trained but not necessarily highly technical. And it sounds like the advertising has been pretty dialed in and automated (though would need to be tweaked in future years, undoubtedly).

There are some types of businesses that are hard to sell. Law firms, for example, can only be owned by lawyers! But companies like this one (and SaaS companies run by many HNers) are much more attractive for buyers.

But even if it's not ever sold, the notion of valuation is still useful because it quantifies the value of the future cash flows and the anticipated time-cost of running the business.

> If they do, it takes years to find a buyer and they are getting a low sale price.

Is this true of standard businesses like laundromat or plumbing?

Or is it a matter of such businesses rarely being in a condition that makes a sale easy? If these are in a good condition accounting-wise for example, they should integrate readily and for a basic multiple of sales into one of the neighbors?

What I have seen is unrealistic prices - and that's another matter.

In real estate there's this idea that if you plan on dying in your home then the value of it is unimportant.

That idea also applies here.

then do the calculations in 5 or 50 years.

Yes, of course there are different options. I'm not saying there's only one option. I'm saying there are more possibilities, not fewer. I.e. selling isn't some weird, Silicon Valley mindset.

Eventually, the owners are gonna want to retire or they will die. Maybe, the business can be inherited or passed on to family, or an employee. But if your family doesn't want to take it over and you don't have any employees who are able to run it (if it is profitable enough you could consider hiring a manager), you either sell or shut down. Generally, most find it preferential to sell. And most who have spent their life working on something would prefer to sell and use the income to fund their retirement- and see the business continue.

There are lots of different exit strategies, but oftentimes a sell of some sort is the only one that really makes sense.

I don't understand your mindset that says you should decide when other people multiply some numbers.

I don't understand how anyone misread that so badly while genuinely attempting to respond.

I suppose we can both say there are things we don't understand.

Unless you have a mortgage, or your city reassesses property taxes, or...

gais, taxes exist, therefore the idea of not worrying about the sale value of your property doesn't apply!

> I don't understand how anyone misread that so badly while genuinely attempting to respond.

Probably because when given a chance, you don't take the chance to explain yourself better, and just do a junior high Uno reverse card response.