How to value website

How do you value an eCommerce website?

For example, lets say it makes 100k sales per month and 50k net profit.

Thanks in advance

kasplo said:

How do you value an eCommerce website?

For example, lets say it makes 100k sales per month and 50k net profit.

Thanks in advance

Click to expand...

There isn't really a fixed straightforward way for this really.

A good deal of the website flipping industry goes by the "cash flow multiple" method. So say given that you make a 50k net profit a month, your website would be valued at some "x" times 50k, exactly what the value of x is depends on factors like your niche's CAGR, volatility of the industry, history of your site etc..

The industry average of that multiple is about 33-55 times the monthly cash flow. So, its not uncommon to see ecommerce sites making 50k to be up for sale for 1.5 - 3 million.

In fact, EmpireFlipper has a few of them right now
https://empireflippers.com/marketplace/?keyword=&monetization=eCommerce

Now this has its own pros and cons. For one, a truly unique and disruptive ecommerce business will prolly give a buyer exponential growth and not really adhere to this "" 33-55 multiple" Standard. A metric like this is used by the industry because most buyers anticipate somewhat of a linear growth or constant revenue over prolonged periods and recoupe their investment in 2-4 years time.

But a few web businesses break this trend and have the potential for high growth. And a metric like this might undervalue this potential.

Even though a value will be decided based on what the buyers are actually willing to pay (you can list it for $50,000,000 but get $100k offers), a business is mostly valued at profit × months and this is probably most accurate. So based upon the few details you posted, i would say $150k-$300k would be a fair price, if you can provide documents of the said income and actual profit. you can expect people to lower you anywhere between 25%-50% of what you are asking, so take it into consideration. Good luck!

My accountant said businesses normally sell for 3x yearly profit.

Take that as you will.