Forum Moderators: skibum
I would like to know if anyone ever ran into an affiliate company for sale, or have seen one sold.
Here's a somewhat hypothetical exercise. Let’s assume these figures:
1) company’s main revenue streams are a combination of affiliate marketing though web sites and PPC.
2) company’s yearly revenue is $1,000,000 (easy to calculate)
Are there people out there interested to purchase such a company? If there are, what would be a premium – x4 times revenue (typical), x2 times revenue (as in consulting), or some other?
Just a thought...if I can make and sell one of these per year, that will beat 9-5 job hands down :)
Take a step back and look at some of these aspects from a buyer's perspective:
- Low barrier to entry. ie, just about anyone can become an affiliate, costs are low, and you dont need a great deal of knowledge to get started (though being sucessful is a different matter).
- The money you make is dependent on the skill of the marketer(s), their ability to identify and exploit new market opportunities, their ability to produce effective copywritten material, etc etc. (so unless your taking over a business with skilled staff, you proberly wont go very far if you have no experience/skill, even if that business made $1M the year before).
- The only real thing in the business that makes it profitable is the skill/ability of the AM.
- As the business does not have any tangible stock, may not have any property(eg, purchased offices) or machinery (most cases, unless your throwing in your old PIII :p), and in most cases (not all) websites are effectivly "junk" sites that can be built in a day or 3, and in most cases (not all) those sites do not offer any recurring visit quality (the best ones IMO do) - what you could claim to value your company assets at is debatable - but (in most cases) proberly not a lot.
I think really the only thing you can value the company on (from a buyer's perspective) is the existing web properties, copywritten materials and current SE rankings.
Given that SE rankings can disappear over night, they are not worth a great deal, but this is all dependant on so many factors. An important one would be "how many websites that *YOU DO NOT OWN* link inbound"?
Quality of domain names - if your including "widgets.com" as a part of the sale, your asking price can justifiably be a lot higher than if your offering "buy-widets-somecompany.biz".
Of course, if you can find someone to buy a company for an amount that exceeds its realistic valuation, then enjoy your new house/car/yacht/etc :)
-J
when i evaluate a company, i normally multply profit, not revenue. when one considers plunking cash down for any investment, one expects a return on investment. If you can demonstrate profitabiliy, then you can sell it. If the return is uncertain, then your multiplier would go down.
Jasonlambert made some valid points. A "real" business, such as a car wash, may sell for 5x annual profit -- but it likely has years of books to demonstrate consistent performance and plenty of assets that that could be liquidated in case of failure. However, it also would have a more limited growth potential.
Especially important is the key talent. Many sellers stay on under contract for a year or more. Also, they sign non-compete agreements. If you are selling a 1-man operation, good luck. If you have something larger that can be proven profitable without you, then you may have an easier time selling it. In this case, I'd take a wild guess at 1 or 2x annual profit.
(er.. i think this thread is out of my league..)
It was all late night rubbish, but morning always brings new perspective :)
So what I am getting is that a one-man affiliate business is not much different as one-man consulting business?
K, I can respectfully disagree with some points, or better yet - expand on them. To answer jasonlambert:
a) Just about anyone can become an AM, but doesn't having a sustainable profitable business that requires minimum work actually counts for something? In this case, correction to my previos idea: how about setting up 2 profitable enterprises a year, and selling each for $100,000? Wouldn't a lot of 9-5 techies out there jump the gun on this one? Beats the heck out of owning a gas station.
b) The money doesn't alway depend on the skill. Depending how one has things set up, the money may depend on simple tricks that a tech-savvy person can learn in a day: like how much to pay for PPC ads.
c) Tangible stock - domains, site name(s), actual web sites. One can argue that just about anyone can build a web site - and we all know that's true :)
Here's a thought: how about them Orbitz? Isn't it essentially nothing more than affiliate site?
fidibidabah, the $ amount is a hypothetical number...in fact who knows, maybe you'll some day find yourself on the seller's side
Yes, it is. I have been trying to convey this for some time. There are many, many valuable affiliate sites. Isn't dealtime/shopping.com just a juiced up aff site?
Anywa, the value of your site will depend on mnay factors. Actually, sites that derive their revenbue form ads can be quite atractive purchases as taking over an ecom opertaion is a huge task.
OTOH, if yoiu are another buy-junk-here-online.com with no content at all, you cannot expect to get much, regardless of CURRENT profit.
mfishy, none of that buy-junk-here-online.com sites, although I've been toying with an idea for some time.
The problem with content sites is that it is not easy to implement quickly into a profitable entity.
RE: point "b" -
Reading through some of the previous posts in this forum it is obvious "getting it right" - ie, knowing how much to pay for PPC ad's is not something that can be learned in a day. Logic argues if it was that easy there wouldnt be any "how do i ..." type posts here.
RE point "c" -
that's a fair and true statement I think, though again I would comment anyone can build a website, only a skilled/knowledgable/experienced few with good business acumen are able to build a truly (financially) successful (relative to the target of course) website.
I am not familiar with Orbitz so cannot comment on them/that/it.
mfishy: "Isn't dealtime/shopping.com just a juiced up aff site?"
Yes it is. BUT they are worth something. Why?
1) A good domain name that is worth money in itself
2) It is an established brand. An established *reputable* brand is worth a lot of money. A lot of effort goes into building it (not something that can be done in a day), and when it comes to purchase time it has the trust of the consumer thus making it easier to sell to your prospect to some extent.
I think mfishy said it best with "if you are another buy-junk-here-online.com with no content at all, you cannot expect to get much, regardless of CURRENT profit.".
2 page "junk sites" on throwaway domains are worth nothing, even if the DO make $#*$!x per month. They have no resale value as far as I am concerned, though other peoples opinions on that matter may differ from my own. - Look at it this way: why would you pay $100,000 for a 2 page website on a throw-a-way domain that you could build yourself in a day?
What IS worth something (IMO) is a site with:
1) Content
2) An established brand
3) SE rankings, + back links from sites you do not own.
4) A good frequency of repeat visitors
5) An opt in mailing list
6) A good domain name
7) A target demograpic that has a bit of cash to spend (always helps)
Ok, the theoretical "ideal" site may make 50% less than the theoretial junk site, but provided it offered a good return on investment (time and money), then given the choice I certainly know what I would choose to spend my money on.
Thye are similar to expedia and are being purchased for 1.2 billion.
And if you really had that property, would this be the place to sell it? Probably not.
One intangible I would add to jasonlambert's list of "what is worth something" is trade secret.
why would you pay $100,000 for a 2 page website on a throw-a-way domain that you could build yourself in a day?
If it makes $100,000 / year?
A "junk" site is easy to build. The ability to turn a junk site into a money maker in two days is in many respects a trade secret. You might be surprised at who would buy.
about a month later google removed their website from the serps
This implies that a website paying for its clicks may be more valuable than a website relying on free traffic.
To learn how to do the dirty work is cheap. To learn how to make that dirty work make you $$$ is priceless. You can't read about that in a book.
And THAT knowledge may be worth many many $$$.
Think about how many semiconductor/microchip/hardware companies were started by engineers ripping of a design while working for a larger company. Of course they will all tell you "designed on a napkin in a coffee shop" story ;)
Linda
<<added>>
Will not be making this pubcon as I will be in Hawaii...I hope all my seo spammer buddies tip a few back for me!
