Worth of Website – Everyone who opens an online business wants to expand it and get the benefit through it. But in most of the cases, the end game is to eventually sell their business to another entrepreneur who wants to take the reins and enjoy the profit from the sale. Alas, most of us don’t know the exact value of their business.
If you’ve built a digital asset you are looking to exit from then the first question you might be having in mind is, “how do I put a price tag on my business which worth for what I’ve created?”
SEO can play a very important role in giving an appropriate price tag. The traffic and ranking of your business can give you some credibility. The buyers can maintain and bring in traffic for sometimes months without significant upkeep. That means they don’t need to make many changes in the business and still can maintain the ranking and traffic and can enjoy the assets of the business.
Worth of Website
For someone who wants to buy a profitable online business and have no knowledge of how to generate traffic can learn and earn at the same time.
Whether the buyer is a newbie or a veteran, he can get the assets of SEO traffic method and hence one of the widest appeals of any other traffic strategy.
How are online businesses actually valued?
This is the most important question when you want to exit your business. Because you don’t want to get underpaid for the work you’ve done to that business.
For any valuation, the fairly basic formula is:
12 months average net profit * 20 – 50 multiple
Typically, a multiple will range between 20-50x of the 12-month average net profit for healthy, profitable online businesses. As you get closer to 50x you have to be able to show your business is growing in a BIG way month over month and that your business is truly defensible.
You might notice that some brokers use a 2x or 3x EBITDA, which stands for earnings before interest, tax, depreciation and amortization.
Worth of Website
There is not much difference in the two formulas; it mainly depends on your preference. We prefer the monthly multiple because it shows more granular picture of the business and where it’s trending.
You can manipulate this formula to give you better valuation as long as you know what you are looking for.
How you can move the multiple needle in your favour?
There are multiple things which you can do and get a higher multiple. A lot of things comes just buy using some common sense and putting yourself into the buyer’s shoes.
The two areas that affect the most multiple come down is the average net profit and how long your business has been around making money.
Average net profit
It’s very simple, the higher the new profit higher will be your multiple will tend to be. There are various ways through which you can increase the net profit and decrease the total amount of expenses.
There are also expenses that you apply on the business which aren’t really “needed” in operating the business called add-backs.
Add- back are the expenses that you might have charged on the business account but aren’t really relevant to business. These can be drinks, meals or vacation put on business account. But if you keep these in mind then they can definitely increase the ultimate sales price of your business.
Length of history
More the history of your business the more attractive your business will be, as long as it is holding steady profit level or showing an upward trend.
Other factors that lead to a higher multiple
There are a lot of factors which can influence the multiple
- Minimize critical points of failure
- High amount of traffic
- Email subscribers
- Social media following
- How many product offering you have
- Hours required
- If your business is harder to copy
Worth of Website – This was all about how to calculate the worth of your online business, but most importantly you should know why you want to sell your business. Selling a business, even if it’s a side project that you’re winding down, is always going to be an intimate process. When you’re ready to pull the trigger, we’ll be there to help you every step of the way.
Hope in this article “Worth of Website” every thing is clear if you have any question then contact us right now.