Valueing an Existing Online Business

[GWM]

Anyone know a rule of thumb to value an online revenue generating business? Earnings over the past few years have been good but have dropped significantly lately? Is there any value for the site based on the previous revenue generating power? I would doubt it but keen to know if anyone can give me some advice.

 

[martin-s]

Profit multiple is the most common, with the multiplier depending on (amongst other things):

* Type of income (AdSense and other less predictable income always valued at lower rate)
* Level of subscribtion income
* Consistency of growth
* Industry
* Risk

Plus assets and stock, minus liabilities.

 

[RobM]

I think the main question from any buyer is going to be why the earnings have dropped recently and whether they will continue to do so or can be boosted back to previous levels.

 

[dashu1]

What's the opinion on typical multiples for affiliate sites?

I guess affiliate earnings are also seen as risky like Adsense?

 

[Brassneck]

Anyone know a rule of thumb to value an online revenue generating business? Earnings over the past few years have been good but have dropped significantly lately? Is there any value for the site based on the previous revenue generating power? I would doubt it but keen to know if anyone can give me some advice.

Or maybe priced on the basis of future potential earnings. I have a lot of sites which hardly earn but they have strong backlink profiles. I would imagine that somebody who really knew how to SEO my sites would be able to convert them into money earning sites.

 

[Grant]

If it was a site that relied on SERPS for revenue and this has dropped, the chances are there is a lot of work to be done and an SEO would not see value in it. By the time they had paid for the site and fixed the issue, they might as well start from scratch.

It's the same as domains...it depends who you are selling to. I've had no success with domains as I don't know the industry but have had some success with revenue geenrating sites ecommerce/adsense/affiliate etc. They have sold for 1-3 years...so there is no real guide.

 

[martin-s]

Without a solid email subscriber base, yes I would expect affiliate income to be based on the same basis as AdSense. I.e. probably a multiple of no greater than one.

 

[philiporchard]

Without a solid email subscriber base, yes I would expect affiliate income to be based on the same basis as AdSense. I.e. probably a multiple of no greater than one.

I'm guessing you mean 1 year...

 

[Skinner]

I've bought sites based on 8-9 x previous month earnings, I have a lower value here because I've heard of sellers who artificially inflate sites by buying a few things for themselves or have friends buy things so I don't trust the previous month or so figures very much. The problem is that over 3+ months the data isn't worth too much to me.

I go 10-11 x the average of the previous 2 months average, or 12 x previous 3 months average.

If the domain is a cracker, I've gone up to 18x, but thats my limit.

 

[martin-s]

I'm guessing you mean 1 year...

No, I mean a multiple of one (one times annual gross profits).

Martin

 

[dashu1]

So as an example with numbers then:

If you had an affiliate site doing an average of say £1200 per month from 3 or 4 products (80% of earnings from 1 of those products), and ignoring the potential to add more products to it (of which there are plenty), then what kind of price would people expect to pay?

I guess there are lots of issues - is it reliant on one product, number of visitors per month, potential to add more products, is the market growing, etc, etc, etc.

 

[martin-s]

£1,200 is the monthly sales, not profit. What are the realistic costs (hosting, marketing, staff time, accounting costs, etc.)?

 

[dashu1]

£1,200 is the monthly sales, not profit. What are the realistic costs (hosting, marketing, staff time, accounting costs, etc.)?

Hosting on a reseller hosting package so not much, say £10 per month, marketing nothing (all natural traffic, don't update the site very often), staff time say 2 hours per week, at £10 per hour = £80 per month, accounting costs nil.

It just earns affiliate commissions, very little costs, I've added staff time in there but really I don't do anything on it except answer the odd comment.