What is your required IRR?

by a searcher from University of Economics Prague

5 years ago

A question to both searchers and SF investors. I work with 30% as the required rate of return (looking for around 5 MIL USD targets).

This is my starting point for high-level valuation. From that and expected cashflows, I arrive at an initial price multiple to be paid for the business which I then adjust slightly with around 7 pros/cons criterions to arrive at my sweet spot multiple. Comparing that with the initial asking price I then see if there is potential to overcome any pricing gap down the road or not.

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searcher from University of Economics Prague

Standard SF evaluation criteria mixed with own preferences. General industry trend, thoughts on management, shape of the books, net margin, earnings volatility, market strategy (for example I penalize cost leadership play as an unfavorable strategy)... But do not take this as mathematical exercise. I do this to verbalize my thoughts but any number that comes out still must be looked at with scrutiny.

5 years ago | like reply | 0 likes

searcher from Bentley University

I like this approche! Can you share the 7 criteria you use?

5 years ago | like reply | 1 like

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