Forum Moderators: buckworks
What other ways are there presently to squarely ascertain the actual
cash value of an e-commerce site for possibly sale in the marketplace?
Any solid experiential insights from another e-commerce site owner
who has sold a site recently would be appreciated. Was a formal site
appraisal actually required to sell the site? if not, how was the value of
the site arrived at ahead of posting it for sale?
Are there viable online venues / reputable honest brokers who
assist in selling an e-commerce site?
BeyondE
Try your yellow pages for a listing and have several look at it.
This is how I evalue (smaller) sites for sale - as a buyer.
A. Get access to the accounts for as a long period as possible, but focus on last 12 months
B. Set a target ROI of the investment, let's say 10% p.a.
C. If the site owner/the numbers seem to give a profit of $100,000/year, then:
C1. $100,000 should be the 10% return, so
C2. ... this means the total worth is 100.000/0.1 = $1,000,000
D. If asking price is above $1,000,000 then ROI must be less than 10% -> dont buy
E. Else, buy
This is a very simple approach, but from the buyer's point of view, it all comes down to the return of his investment. Sometimes it's much more complicated than the above, because the ecommerce site might be bought as part of a consolidation effort, for it's DB of info, it's client list, whatever. But for straightforward cases, I use the above formula to guide me.
Btw, this is "Rich Dad, Poor Dad" stuff, in case you are interested.
Most sites selling for under $50K go for 6x to 18x net monthly earnings. You may not like the figures but that's what the reality is. You seem to have not factored in the much higher perceived risk for web businesses vis-a-vis B&M.
E. Else, buy
the relative worth of having
a domain appraiser such as Hollywood Domains, for example, to
prepare a formal appraisal
The hands on way to do this is to monitor other sites being sold, get Sales Memorandum and other info from the sellers, and see what sites are really selling for. Business brokers/business "transfer agents" and site-for-sale forums/sites are good places to start. Give yourself bonus points for the length and stability of earnings, deduct points for level of knowledge/time required to operate your business.
Just call me hungry for real site sales barometer to go by.
BeyondE
RE: The hands on way to do this is to monitor other sites being sold, get Sales Memorandum and other info from the sellers, and see what sites are really selling for. Business brokers/business "transfer agents" and site-for-sale forums/sites are good places to start. Give yourself bonus points for the length and stability of earnings, deduct points for level of knowledge/time required to operate your business.
Since I have never bought or sold an active e-commerce site, how would
I go about finding out just exactly what other sites are selling for? I do not
know a thing about this subject, I do not have any problem admitting that,
as I had never considered selling my site until very recently.
BeyondE
Of course small businesses aren't worth nearly as large a multiple as large ones (after all, you could be just one Florida update away from ruin).
Be really careful about the numbers. Lots of business sellers run the operation out of their house and do lots of work themselves. You don't want to "buy a job", so put in a reasonable salary for a manager and reduce their earnings by this amount before you apply the multiple - same for office space etc.
Truth is lots of small businesses are worth lots less than what the owner thinks they are. Trick is to find a business that is really for sale, not one where the seller thinks, well, if I could get a million I'd sell....
2. If a second and third opinion don't cost anything - then why not get them? A chartered surveyor maybe the person whose valuation the bank requires before lending on property but it's the unqualified estate agents who often have a good idea of what your property is worth. Talk to business transfer agents (who may also be called business brokers), many provide free valuations.
3. Irrespective of all the valuations the only way you know a business is going to fetch a fair market price is by getting your sales pitch together. Prepare a memorandum of sale and include all salient points, crucial parts of your stats (No BS, the moment I see someone has based his claims on "hits" instead of page views/uniques he immediately loses credibility in my eyes. The first impression is that he's either ignorant or a liar). In your SM include also all the financial figures - both gross and net. Don't make the mistake of assuming your time is free. Detail all the time spent on the site, assign a value to it and deduct it from Gross Profit to give the true picture of earnings. Put together some management accounts, your summary of the competition and honest "Pro and Con" outlook for the future. Any risks a buyer is likely to spot himself should be in your SM.
4. Market it. Unless you put your business up for sale you'll never know if you are going to achieve that asking price. Also, it'll give you an idea of what the market is really biting at. If you need confidentiality then you can market without disclosing your ID and get prospects to sign an NDA. If you don't have an exclusive agreement you can market in different places - various webmaster sites have a "Site for Sale" section. Various online brokers like businessesforsale.com will let you list for a small fee, others are free.
I am pretty close to oddsod on the valuation.
It seems you are nowhere close - with a valuation of 12 times what mine was. You are talking annual earnings, I'm not.
Ahhh there is the rub. No one is talking.
I would kill to know SOMETHING about what should be expected in sales - for example weekly, monthly, after being online for a certain number of years
[edited by: lorax at 11:56 am (utc) on April 20, 2005]
[edit reason] language edit [/edit]
