Attributes Of Online Businesses That Determine The Business Value.
The most common cause for sellers of online businesses to hire website business brokers with understanding in online businesses, is to assist in putting a value on their business opportunity. When calculating the actual value of an online business, the financial profit and loss statements will be the main focus for the appraisal. The decisive factors that emphasize a higher or smaller multiple of the cash flow is calculated based on the baqsics that are exclusive to online opportunities. This primarily forms the reason for a prospective buyer to pay an standard asking price or larger multiple of cash flow. The following list delineates what are considered pertinent and valuable aspects of an online business opportunity:
Domain URL – a strong one or two word domain name that is common to the niche of the product or service will be the most valuable, especially those with dotcom suffixes. The name will be easy to trademark if it is small, clear and common.
Search Engine Positioning – websites with significant organic rankings for the majority of the keywords relative to the business niche are going to be more costly – especially those with good positioning in the three major because of its status.
Actual Unique Visitor Traffic and Page Views – directly related to natural rankings monthly. Mainly, which visitors are coming from PPC ads vs. visitors brought through unpaid sources. Other aspects to ponder are the countries of origin where the visitors are arriving from and the top ten to twentyfive referring websites.
The Age of The Online Business -the more seasoned, the greater its permanence and the more likely it will be considered an authority website with better PR. It also allows further extra historical information to identify opportunities and weaknesses.
Proprietary information and products - content is very important – unique content along with proprietary products, services or information all can render a strategic edge.
Customer Database – a significant customer base with a healthy percentage of recurring billing or auto-ship structure will add to the appraisal.
Market Size, Upside Potential and Competitors – assessing how available the product or service is through traditional channels and how many product choices can determine solidity and future growth and income opportunities. How trendy is the market, what the price ranges are, other competitors selling the same products and their relative dominance or competitive advantages or weaknesses will factor in to the appraisal.
Growing Trends – If sales, profits and visitors are trending positively or at least flat then the business is going to be more valuable than one moving in decline. Sales, profits and visitor improvement are the greatestsignificant effectors on the multiple applied to the annual net cash flow to arrive at the appraised market value. The average listing price presently is 2.5-3 times net annual cash flow. When a online business has very good growth 25-100+ %, a much better multiple – 3.25-5 can be applied to come up with a reasonable asking price.
Product Wholesalers – the quantity and quality of the wholesalers and the contracts in place with them, as well as any barriers to entry implemented by them, will establish competitive value. In addition, all special products or services that are unique to the online business can affect the appraisal.
Inventory Element – if the business sells actual products that need to be shipped, does it demand inventory to be on hand or does it utilize a drop-shipping or fulfillment house to fill? This will establish the amount of resources needed to buy stock, evaluate if warehouse space is required or if the online business can function from the home, as well as the amount of over-head it requires to run it. It also indicates the profit margins, amount of time needed to run the business and the timeliness of delivery.
Foundational aspects aside from the actual gross revenues and net cash flow will lure a suitor to make his best offer, potentially well above the average market multiple because the online business has greater prospect of establishing a stronger return on investment than online businesses without them. Sellers with online businesses that have these aspects most often get at, or close to, the asking price for their businesses and sometimes even more when there are multiple buyers.
So, if you are a interested buyer looking for an onlinebusiness for sale, take caution to look over these aspects closely if the P&L meet your criteria. Sellers should pull together as much information on these aspects as possible to present to the buyer so they can make a good offer that is equitable to both parties.
