When people quote high revenue multiples, usually they're in an area that they see high future growth. Patrick's writings on BCC make it seem like a business that is stable to declining. Of course, as you point out, the low multiple (3x annual profits) means theoretically recouping the investment in three years (not including interest and opportunity cost).
Patrick posted that BCC's 2014 sales declined 33% from 2013. If sales keep declining at that rate, $19k turns into $13k for 2015 which turns into $9k for 2016, $6k for 2017, and $4k for 2018. At that point, the business really isn't generating much and it would take well over a decade to recoup even without accounting for interest and opportunity cost.
But it might level off. It might go up if the new owner puts some love into it. However, I think the most likely scenario is that revenue and profits continue to fall. That's not to say $57k is a bad deal for the site, but I don't think it means easy-money. It seems like a sane deal.
I think a buyer doing due diligence would have to look at the site, calculate (or guess) at a declining revenue curve assuming ~$12-18k in profits for 2015 and maybe seeing the rate of decline flatten out in the future and see some profits to be had. I know, $19k/year with a $57k price-tag looks really appealing on paper and makes it seem like easy money ($19k/year forever!). By Patrick's own writings, BCC's visits, sales, and revenue are all declining by a third year-over-year. He hasn't invested in the product for a while. There will definitely be some auto-pilot money, but not $19k/year for three years. It can still be a good deal. It's just important to go into deals eyes-open.
$57k seems like a fair price for BCC. If the new owner does good marketing and customer acquisition, profits might level off quickly, but that also means really working on the project. There's a decent amount of risk in a project this small and so charging too much for it doesn't really account for that risk and the current downward trend. That said, it seems like a bit of work could go a long way and recoup the investment in the 5-10 year time-frame and make a reasonable amount of money. It can be a good business, but it isn't free money.
I think if the profits were stable year-over-year, Patrick wouldn't be selling it (or he'd be selling it for a lot more money). If it had brought in $19k/year since 2010 totally stable, I could see a six-figure price tag on the site (maybe $150k, maybe more). But according to Patrick, BCC "has been on a steady decline since [2012/early 2013]. This decline accelerated in 2014."
* None of this is meant to be negative about patio11. It's just meant to be realistic about the likely future profits of BCC based on the decline noted by patio11 in his 2014 Year in Review: http://www.kalzumeus.com/2014/12/22/kalzumeus-software-year-....
"None of this is meant to be negative about patio11."
I always find it unfortunate that it is necessary to walk on eggshells around a person in any online community for fear of some kind of retribution by other members. It doesn't really serve any learning purpose for people to hold back on comments that might be helpful just because a particular member happens to be well liked.
"It doesn't really serve any learning purpose for people to hold back on comments that might be helpful just because a particular member happens to be well liked."
It's the politics of HN. If you say anything bad about Patrick (no matter how true or constructive) or say anything against the status quo (example: legalizing MJ), you will be down voted.
Patrick posted that BCC's 2014 sales declined 33% from 2013. If sales keep declining at that rate, $19k turns into $13k for 2015 which turns into $9k for 2016, $6k for 2017, and $4k for 2018. At that point, the business really isn't generating much and it would take well over a decade to recoup even without accounting for interest and opportunity cost.
But it might level off. It might go up if the new owner puts some love into it. However, I think the most likely scenario is that revenue and profits continue to fall. That's not to say $57k is a bad deal for the site, but I don't think it means easy-money. It seems like a sane deal.
I think a buyer doing due diligence would have to look at the site, calculate (or guess) at a declining revenue curve assuming ~$12-18k in profits for 2015 and maybe seeing the rate of decline flatten out in the future and see some profits to be had. I know, $19k/year with a $57k price-tag looks really appealing on paper and makes it seem like easy money ($19k/year forever!). By Patrick's own writings, BCC's visits, sales, and revenue are all declining by a third year-over-year. He hasn't invested in the product for a while. There will definitely be some auto-pilot money, but not $19k/year for three years. It can still be a good deal. It's just important to go into deals eyes-open.
$57k seems like a fair price for BCC. If the new owner does good marketing and customer acquisition, profits might level off quickly, but that also means really working on the project. There's a decent amount of risk in a project this small and so charging too much for it doesn't really account for that risk and the current downward trend. That said, it seems like a bit of work could go a long way and recoup the investment in the 5-10 year time-frame and make a reasonable amount of money. It can be a good business, but it isn't free money.
I think if the profits were stable year-over-year, Patrick wouldn't be selling it (or he'd be selling it for a lot more money). If it had brought in $19k/year since 2010 totally stable, I could see a six-figure price tag on the site (maybe $150k, maybe more). But according to Patrick, BCC "has been on a steady decline since [2012/early 2013]. This decline accelerated in 2014."
* None of this is meant to be negative about patio11. It's just meant to be realistic about the likely future profits of BCC based on the decline noted by patio11 in his 2014 Year in Review: http://www.kalzumeus.com/2014/12/22/kalzumeus-software-year-....