How should you quote run-rate if planning exit / raise or demonstrating success?

That is a LOUSY return. You'd be better off putting the money in a savings account in the bank. I do not know your industry well, but in mine (Marketing Agency) I aim for a net profit of 15% after paying corporate taxes, wages and all overheads.

Here is a link to a basic model - http://monetizepros.com/tools/template-library/subscription-revenue-model-spreadsheet/ Depending on the purpose of the model you could get much much more elaborate or simpler. This base model will help you to understand size of the prize. But if you want to develop an end to end profitability model (Revenue, Gross Margin, Selling & General Administrative Costs, Taxes) I would suggest working with financial analyst. You biggest drivers (inputs) on a SaaS model will be CAC (Customer Acquisition Cost, Average Selling Price / Monthly Plan Cost, Customer Churn(How many people cancel their plans month to month), & Cost to serve If you can nail down them with solid backup data on your assumption that will make thing a lot simpler. Let me know if you need any help. I spent 7 years at a Fortune 100 company as a Sr. Financial Analyst.

SOM refers to the portion of the market that your business COULD actually capture, as you stated: "[the] % [you] can realistically achieve from the SAM." Let's use an analogy to break this down - and pretend you are talking about fishing instead of project management software. TAM refers to all the fish (that manage projects) in the sea. SAM are all the fish (that manage projects) within casting range of the dock you fish from (ie your solution is viable for them). SOM are the number of fish (that manage projects) you can reasonably catch within the amounts of time, energy, and bait you can allocate to fishing. The question within a question you ask about guidelines on believability is a great one. And, while I don't have a guideline or benchmark to share, I can confirm your instinct; ensuring that your projected SOM is reasonable is absolutely critical. The best way to project this is by having at least some of the equation variables grounded in reality - ie, actually catching some fish. If you can show how much it costs to acquire a customer, how much it costs to service that customer, and how much you'll make from that customer over a lifetime, you've got some great empirical evidence to show how you'll achieve growth within your SOM. I don't think of SOM as a target - it is rather the theoretical maximum number of customers or revenue I can achieve within the (sub)universe where my product or service adds value. In the end - the number is important - but not as important as how you present it, and how you'll approach it with your product. As an investor, you want to see more than just the answer - you want the thought process behind the answer. Was the founder thoughtful in their approach, did they look beyond the obvious while remaining pragmatic? Do they understand clearly why the SAM (macro-environment) and SOM (micro-environment) break out of the TAM in the proportions they've listed? More than happy to dive deeper on this.

"Based on the success we are able to achieve" suggests, to me, you are looking at a price that will be tagged to an earn out provision. In other words, the price of the deal will be contingent on you achieving specific revenue targets in the future. If I'm reading this wrong, please correct me because it's an important piece of information. Early stage startup typically suggests a focus on revenue growth with minimal focus on earnings. The most valuable acquisitions will be those that have growth in the top quartile of the industry along with an EBITDA that is also in the top quartile. Companies with these will have the highest multiples. Revenue multiples are also a function of the industry and the general character of the market. Currently, the IPO markets are doing pretty well and the overall M&A market appears to be pretty solid making multiples equally solid. In terms of industry, the media publishing industry has moderate to slow growth depending on the segment. I'm assuming there is a social or online component to your startup which would suggest that it would be part of the new growth side of the market. Generally speaking, market growth averages are at about 8% for larger companies suggesting that new entrants should be able to sustain low to mid double digit growth over a longer horizon. "Growth rates", i.e. percentages, can be meaningless for very small companies. For instance, a company that grows from $25,000 to $250,000 in a year has a massive growth rate..... but the value may be very low due to lack of track record and overall profitability. As such, it can be very hard to estimate multiples. That said, if I were putting forth a hypothetical, it would be something like the following: Assuming: The company has over $1M in revenue and is growing at an average of 12 - 15% per year. Assuming: The company is profitable, but barely, say something in the 10% EBITDA range. Assuming: The company is a service company with few assets but is not subject to significant brain drain (key people leaving would result in devaluing the company). If any of the above are wrong, it can change things significantly. Revenue multiples might be in the 0.7 - 1.15x revenue on forward looking and .9 - 1.25 on a trailing level. EBITDA Multiples could be in the 8 - 10 times on a forward looking and 10 - 12 times on a trailing level. Take it with a grain of salt because there are a lot of factors you don't mention and more information is important to make a meaningful diagnosis.

YES! You certainly can sell a services business; and, if it is positioned and prepared properly, for pretty great returns too. There are a number of different exit strategies available to you, not ALL of them acquisition. For instance; we have helped service business owners transition (exit) from their business without selling the business, but instead by retaining a minority interest and receiving large (7 figure) royalty checks for years after their departure. That said, IF acquisition is what you want each of the dozens of strategies available to you really begin with identifying prospective buyers, understanding their motivation for acquisition and pivoting your company into alignment with those motivations. I explain the process in more detail here: http://www.zerolimitsventures.com/cadredc Hope this helps! Good luck. Steve