This is the 4th chapter of “How To Evaluate a Internet Property”. You can read part 1 – Financials here and part 2 – part Rate of growth here and part 3 – The Run Rate Here
Resources to run the Internet property you are interested in buying should be a very key point in your valuation. There are 3 major resource categories you will want to think about here. They are Technical, Human, Experience in Niche.
Technical Resources – Do a very in-depth look at the technical resources being utilized by the internet property you are valuating. Do they administrate all there own servers? Do they do all programming in house? Who handles DNS ? Backups ? Look at every possible technical area and then ask yourself do you have the ability to perform as these same technical resources have been. Sometimes 1 person can do the work of all of these people. In my companies case we do 100% of this in house just with myself and 1 other employee. But we have a combined 20 some years experience in these areas. This is also an important time to talk to your current staff and get there assessment. Work with them individually and have them point out any concerns they have if your acquisition goes through. The last thing you want to do is take over a company and instantly have to hire a dozen people that will account for at least 1 million dollars a year in payroll that you had not budgeted for.
Human Resources – This is my category for the non technical people that are working for the company you are looking at. They can be anyone from accountants to writers… you name it. Do not underestimate the value of human equity.
Niche Resource People – This falls somewhere in between. Its basically the people who have been with the business for a long time and would take a very long time to train/replace. Each company has some of these invaluable people. They understand how the guts of the company/niche work. Most of the time these people are completely missed until after a deal is done then tried to be stolen away by the purchasing company.
Resources are the most missed part of a proper internet company valuation. Make sure you take a good look at them.
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Jeremy Schoemaker – who has written 2416 posts on ShoeMoney.com.
Hi I am Jeremy Schoemaker and ShoeMoney.com is my blog. 99% of the post here are done by me but you will see others occasionally make guest posts. This blog is fun to write but for my day job I run several online companies.
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{ 29 comments… read them below or add one }
The people who understand the niche would be vital because they have the connections which would take you on the outside or just getting into the niche, months or years to make.
I have enjoyed all of the previous posts on valuing an Internet property. This chapter is interesting because it links the value of a web site to human capital involved.
a VERY GOOD INFORMATION source.. keep it up…
this can also be where alot of savings can be gained. Combined with furniture, fixtures and equipment expense reductions you can quickly make an unprofitable property break even maybe even profitable.
Nice Post saw via Twitter.
I have been through one of the sales before and you are right on the money with this. The Human equity is what I find that most do not consider
I definitely think the people are one of the most — if not THE most – important aspect. Everything else can be created.
I never knew we can evaluate internet property too.
Thats an interesting series. Thanks.
Nice post. Aw, how I miss Warcraft 2!
That looks like warcraft 1.
We need more vespene gas, Shoe!
thats actually starcraft!
And who doesn’t like star craft? You need to put this info in a book. You can title it “All you need to start your internet business, its Shoetime!”
No maybe not!
I think john chow needs to read this blog series! LOL… Nice Screen shot by the way!
Good post.
I’m not sure if this is part of another post, but I would also add vendors as a resource that should be carefully examined as well. I’ve run into more than a few e-commerce sites that have essentially one or two vendors and if those relationships sour, the e-commerce site is left with no business.
Warcraft 2; Warcraft 1 you had to build roads and then built on those roads.. heh!
I agree because all that knowledge would be so hard to replace. It just doesn’t happen overnight.
~Terry
LOL,
Human resoursces among all is most impostant to me.
great post, will bookmark and come back to this. Cheers
well it says its warcraft in the image name
Despite this it’s a phrase from starcraft
i love warcraft
I recently bought a new computer and to my dismay I did not pay any attention to the graphics. Started it up, and starcraft and warcraft would not work! Doooohhhhh…. CompUSA here I come!
Still is hard to undertand how you values are determined where actual income has such comparatively little influence on the valuation.
People are everything! Resources can be duplicated not people.
Love the original Warcraft screenshot used! It goes without saying that resources are the most underrated aspect of an internet property. Without the individuals and systems that created the success in the 1st place, you could be on a hiding to none. Will the sytem still function and evolve if the primary developer doesn’t come with it, or will the system function without the necessary staff who know all the tricks to keep the back-end functioning?
Heh, love the 8-bit video game graphic.
Starcraft II is under development, years overdue IMO, but the previews from gamespy is promising that the wait will be well worth it. The Protoss will soon rule the universe again!
Nice read on a rainy monday morning,thanks