Selling online business

June 26, 2008 10:31 AM

How to figure the asking price for an online business?

I created a subscription-based online business ten years ago that's remained consistently popular, with good steady traffic from Google and has an immediately recognizable brand name association. It generates into six figures a year.

I'm now wanting to move on to other things and sell the business. But I'm clueless as to how to come up with an asking price.

A 'big business' type friend of mine said I should figure what a ten year profit would be for my site, and that would become my asking price price when I'm going to sell. Is that accurate?

posted by zenpop to Work & Money (3 answers total)

As far as I know it is not. What I would do in your case is contact a business broker. In many states this person is also a real estate agent as the process for buying a business is generally the same as buying a house (there is an escrow period, inspection, etc.) as long as we are talking about individual to individual. The business brokers that I have spoken to have said that you can expect to get anywhere from one to four years worth of gross profits for the business. You can sometimes get more if you can predict future market for the product or can show length of time in market. If you are a do it yourself type there is a great book by the NOLO Press entitled The Complete Guide to Selling a Business. Which I used to evaluate whether it was the right time to sell the business that I am involved with.
posted by skewedoracle at 11:19 AM on June 26, 2008

i've heard of a brick and morter business go for the cost of the physical assets + 3 yrs of profit, but that's complete hearsay
posted by maulik at 1:31 PM on June 26, 2008

If you don't pay yourself a set salary, subtract from your profits the amount you'd have to pay someone to manage the business. Multiply the resulting net profit by 5. That's a good ballpark. The reasoning behind that is that it provides the purchaser a 20% return on their investment. You can get crazy with the analysis, and look up your industry multiplier by revenue, yadda yadda, but the simple rule of net profits times 5 will give you a good ballpark.
posted by dblslash at 4:49 AM on June 27, 2008