Selling online business

mat · Oct 6, 2008

I have an online business making £xx,xxx a year.

Ive been approached by an American company who sell the same product in America and are looking to expand into UK sales. My site ranks number 1 for all key terms and pretty much dominates the UK market for this product.

They want the domain names, branding and website.

I know what I would be willing to sell it for but what is the "going rate" when it comes to something like this... How many years multiples of profit would I be looking at?

Lets also bare in mind that there could be a bit of tyre kicking going on here and I dont want to scare them off with a gigantic amount.

Any help would be great!

WaftyCrank · Oct 6, 2008

I'd say at least 3 (possibly 5) years.

ScottJ · Oct 6, 2008

When you measure net profit be sure to include 'wages' for the time it takes (you) someone to maintain the site, that's often overlooked when you do it yourself, I'd agree that around 4 years is a reasonable multiple however your sites age/rankings and dominance can be an intangible asset that adds more.

Edwin · Oct 6, 2008

How long will it take you to build up a similar business again?

If it's part time or just takes a few hours a week, then (from your point of view, not theirs) it's almost like an annuity or other investment that's paying a return of £xx,xxx a year.

Pretend that it's £10,000 for the sake of discussion. You'd have to have £200,000 in the bank to earn that same £10,000 per year at a 5% interest rate (which is probably historically feasible over a long period even if it's a pipe dream today) i.e. to replace the revenue stream you'd be giving up.

Put another way, if you took 4 times annual earnings for a sale, then you'd get £40,000 out of the sale. Stick that into the bank at 5% and you'd only be seeing £2,000 per year as a result.

Adjust all the amounts above for the actual work involved in generating the £xx,xxx, the "defensibility" of the current revenue stream, the actual number behind the £xx,xxx and your financial situation... but hopefully that's at least provided some food for thought.

stender · Oct 6, 2008

Dont know what the domain is but smells like you have the keywords otherwise what's to stop them entering the market themselves? likewise do you think you could get on page 1 with a new domain and brand easily enough?

paul · Oct 6, 2008

Something to bare in mind is, if you're top for all the keywords in the industry then if you don't stay where you are there is only one way you can go. You need to factor this in when you work out what the site is likely to make you over a set period of time, if a major competitor is entering the market the chances are they could knock you off some or at wost all your main keywords.

Jeewhizz · Oct 6, 2008

Bricks and Mortar businesses traditionally go for 4-5 year multiples. Online ones go for around 1-3 in my experience.

You should be asking your accountant for advice as well.

julian · Oct 6, 2008

there are lots of factors

depends on what your selling, how long you been selling it, is it growing, is it a dying market, competition - the list is almost endless, Is the net profit going up exponentially. What are the biz assets, stock etc - seek someone who knows wtf their doing and can give you some proper unbiased advice.

what is the business anyway?

yesterday · Oct 6, 2008

I'd say a bigger multiple.

Typically stocks on the stock market trade at 10-15 (and in internet bubbles upto several thousand) times their annual earnings figure.

The UK market is currently in a nadir and hasn't traded this low for many years and it is at just 8 x.

The price earnings ratio (p/e) tells you what price the shares are trading relative to their profits the year before (8 = 8 x profits).

Your situation is better as you have a) consistent, b) growing, c) dependable income streams and have cornered many of the keywords in the market thereby offering up a reasonable barrier to entry for any other company trying to get into the market.

[apply to your own situation!]

If I were you I'd ask a negotiator (can be found through your accountant generally) to negotiate it for you.

Or start at x multiple say 10 or 12 stating a similar quoted company stock that is trading at that multiple (so you don't scare him off as being random!). Negotiate downwards only if you have to.

Otherwise decide for yourself where it's going and decide for yourself what it's worth (as above posts) and set that as your target figure after all negotiation is done.

good luck

yesterday