A very interesting deal crossed my desk last month.
A school for sale just a few hours from where I grew up.
Eleven crore of revenue. 300 students enrolled against 1,500 seats.
Their asking price?
They wanted seven hundred and fifty crores.
I took down the numbers and worked the earnings out on the call. Out loud, badly. My valuation landed somewhere around eight crore.
Roughly a hundred times lower than what they were expecting…
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I went looking for comparables to push back with.
There aren't any. No completed-transaction data here. No broker with a public record. Nothing you can put on the table and point at.
Then I started seeing it everywhere.
A publisher doing three crore wanted sixty.
A SaaS founder doing fifty to seventy lakh a year wanted ten times revenue.
Public comps in that category trade at six to eight times EBITDA.
A manufacturer wanted seventy crore on EBITDA that was negative. There's no multiple. You can't divide by that.
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Here's the bit I had backwards.
I'd been treating those as the problem. They're not. A man asking a hundred and eighty times tells me so in the first ten minutes. I say no, close the tab, lose half an hour.
The one that actually cost me was an insurtech doing claims processing.
Seven times EBITDA. Reasonable. Boring, even.
I spent months on it. The tech turned out to be commoditising and the founder had quietly stepped out of operations a while before.
Neither of those shows up in a multiple.
The stupid numbers are easy no’s. The reasonable ones are where the time goes.
Once a seller has said a number out loud, then he owns it. He's told his wife, he's told his brother.
After that you're not negotiating against multiples, but the sentiment and emotion of a family business.
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What's the maddest number you've been quoted?
Hit reply. I'm collecting them.
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Also
Selling a business? [email protected], tell me what it does and what it makes.
Want someone to find one and buy it for you? That's Kautilya. Reply "Kautilya" and I'll send details.
– Dev
P.S. - I did that maths live on the call, you can see the moment it lands and the seller begins to get personally offended. However, there are many sellers that take it as constructive criticism and understand they can always improve their business.
The challenge is finding these gems in the rough.
