[CaveTech]

Sorry to break it to you but 10% profit on 6.5M rev is very low and will absolutely not fetch a high multiple, especially considering this is a mature 10 year old business. This is not a high growth business and you may have grown overly rose colored glasses by thinking it could be priced as one.

[grepfru_it]

So much more. What assets/patents do they own? How much money is in the bank? What does their liability sheet look like? How “hot” is their industry right now?

Some time ago I found a good formula to plugin numbers and get a valuation multiple. The questions above were the ones that really moved the multiplier. A major lot of “startups” are in the 1-2x range. The hot ones will peak at 7-12x.

[jongjong]

I suppose the industry is not hot right now. EdTech was never really very hot. It was 'luke warm' at best, a decade ago. They own a lot of software, also, they publish their own math textbook (both digital and print). They have licenses with thousands of schools across multiple countries. I don't recall they have any debt.

I feel like they could easily bump up profits by $2 million just by letting go of people... But they could probably double the license cost per student. Although schools don't have much money, they are kind of slow and bureaucratic; set in their ways. It's a small cost for them anyway, once a system is part of the curriculum, they'll probably pay extra to avoid reorganizing the lessons.

[CaveTech]

As you describe this is largely a cash flow business and the bulk of the value should be extracted via dividends to the benefit of major shareholders.

A tech enabled business needs gross margins north of 70% to be attractive from a leverage standpoint, unless revenue is scaling very rapidly. Without these there’s no attractive exit opportunities.