Legal, Personal Finance Contingent Fee Agreement, No Win No Fee Compensation, personal injury claim, Rule of Thumb
A general rule of thumb for a contingent fee agreement is that for a personal injury claim case it will take 9-12 months to reach agreement on compensation.
Startup, Venture Capital equity, ownership, Rule of Thumb, stock options
A rule of thumb for startups is to set aside a pool of stock options that equates to 10% of the company following its first round of funding. This employee stock option plan will be used as compensation for future employees, that is, employees beyond the founding team.
Personal Finance auto insurance, auto insurance quote, Insurance, Rule of Thumb, Savings
As a rule of thumb, you should estimate that you can reduce your auto insurance by 10-15% by combining your automobile insurance with the same carrier as your homeowners or renters insurance. This discount could be applied to your auto insurance or you homeowners insurance. For example, I received a 10% discount on my homeowners insurance because I had my auto insurance with the same insurance provider.
It’s important to note that despite this discount, you should still shop around to get homeowners and auto insurance quotes from separate providers. I did this and was able to save over $500 per year even after having my homeowners increase because I was no longer getting the discount.
Acquisition, Valuation Maintenance, Multiple, Revenue, Rule of Thumb, Software, Valuation
A rule of thumb for the acquisition value of a revenue stream from software maintenance is 3 to 4 times trailing twelve months revenue (3-4x revenue multiple). This assumes that the maintenance stream has a high renewal rate (typically in the 85% to 90% range) with high gross margins (80% or higher).
Business Financial, Rule of Thumb, stock
A very very loose Rule of Thumb for gauging when the stock market has hit bottom is when news of the crash has become main stream. This is typically indicated by front page articles in the main stream (i.e., non-financial press) that are talking about the financial crisis.
Acquisition, Business Acquisition, LOI, M&A, Rule of Thumb
Most large corporations require approximately 9 months to identify an acquisition target. Once a corporation has defined its strategy and identified a target area for acquisition, it typically takes about 9 months to identify the players in the space, conduct preliminary due diligence, gain necessary internal approvals, and negotiate an LOI (letter of intent). Once the LOI has been signed by both parties, it will usually take 1-2 months to complete due diligence and negotiations so that a Definitive Agreement can be executed. Including this time, a corporation may take as long as a 1 year to complete an acquisition.
Business, Startup ASP, Average Selling Price, business model, Rule of Thumb, sales force, Start-up
A product or service needs to have an Average Selling Price (ASP) of at least $200,000 to justify a direct sales force. Anything less than $200k needs to be sold via partners, channels, or inside sales. This should be helpful in developing business models for start-up companies, particularly in the enterprise software space.
Legal, Private Equity, Venture Capital 99/1 Rule, Committed Capital, GPs, LPs, Rule of Thumb
For a myriad of complex legal reasons, Limited Partners require General Partners to contribute their own capital into their venture capital fund. While this amount can vary, the vast majority of the time GPs need to contribute 1% of the committed capital with LPs contributing the remaining 99%. Thus the 99/1 rule.
Private Equity, Venture Capital Fund, J Curve, Rule of Thumb
The depth of an venture capitalist or private equity investor’s “J curve” is typically 3 years. In good times (such as 1999) it can be as short as 1 year. In bad times (such as 2002) it can be as long as 5 years…or infinite. A “J curve” is the graphical representation of the value of a portfolio of illiquid investments over time. For example, in the first years of a venture capital firm’s new fund, they are deploying capital at cost and collecting management fees. Therefore, until they have a reason to write up the value of their investments (follow-on funding at higher valuations) or a liquidity event, the value of their fund is lower than the capital contributed. So, the depth or length of the “j curve” is the length of time that a funds value is less than the capital contributed.