The ups and downs of a sales price based on future revenues

[tke71709]

We've had some discussions here about structuring sales prices based on future revenues (e.g. revenue targets, revenue sharing, etc...)

An article related to that, of course in valuations most of us will never even dream of hitting

http://www.nytimes.com/2010/05/13/bu...ref=technology

Club Penguin Misses Goals, Giving Disney a Half-Price Deal

LOS ANGELES — Club Penguin, the subscription-based online community acquired by the Walt Disney Company in 2007, has failed to meet profit targets that were tied to $350 million in payouts to the Web site’s creators.


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[Clinton]

Thanks, tke71709. Interesting. What's worth noting is that with every big deal there tends to be a) structured payments and b) licences, staff, premises and many hallmarks of a B&M.

[benitez17]

I have been able to do deals with seller financing, but never have been able to tie payment to future revenues. If I were a seller, I don't think I would be interested in pinning my hopes for a higher sales price on the abilities of some unknown person to perform (obviously making a deal like that with Disney is a little different).

[tke71709]

making a deal like that with Disney is a little different

Unless they tank the short term revenues to save $350 million dollars in the long run

[Clinton]

benitez17, yes, it's rare to agree such a deal, but sometimes it just sorta clicks into place. I'm normally the suspicious/cautious type. But when I bought the finance network, the seller and I just seemed to "get" each other. There was a lot of trust and I still haven't transferred over many of the best domains to my name. The contract included several clauses on profit levels and contingencies. On some of the earning accounts the money still goes to him on the understanding that he'll forward to me. On the other hand I've got to keep track of profit and pay him $x when it reaches a certain level. And, amazingly, that's all working so smoothly with both parties just taking the other's word on everything.

I think he owes me about £10K-£20K. I don't know the exact figure but I'll work it out one day and I have 100% confidence he'll just send the money over when I ask without demanding any proofs.

It's such a pleasure working with some sellers. But in my experience such working relationships are very rare.

[mgallone]

I think he owes me about £10K-£20K.

Forget $350 million, that right there is a figure I can only dream of.

[Clinton]

mgallone, sorry, didn't mean to boast.

A few years ago I would have considered that a huge sum too. What's fantastic about business on the net is that you really can achieve a lot in a very short space of time (and it's much easier than with B&Ms). Here's to you getting there soon. To everyone on these boards getting there!

And if I can help a regular contributor in any way please drop me a PM.

[mgallone]

Haha, don't worry Clinton, I didn't take it as a 'boast' in anyway- I'm just slightly awestruck by some of the figures mentioned. I've started a website recently, my total costs so far have been around the £180 (a relatively large sum for me) mark- that involves someone to make a nice looking design, and a content writer whilst I'm bogged down with exams.

I guess my dream for this 'project', if you will, is to have a regular source of income with which I can fund my stud.... alright, to fund everything BUT studying, though the principle remains the same