Business sale how to calculate the selling price.

14 replies
Hi guys,

I was wondering to sell my Social Media Business but on nowadays i don´t have a clue how to calculate the entire business price.

It should include:

- Responsive Mailing list (200 clients)
- Facebook, Twitter, Pinterest, Linkedin business profiles (+ Fans, Followers, etc)
- 17 months old Website
- The design of the website + Content cost me around $2k
- Average revenue of $1000 monthly based on the last 17 months
- Sales come from Organic traffic and returning customers only.
- About traffic, the site has about 155 daily visitors.

you can check here

Having these features what do you believe to be the adequate selling price? i was thinking about 2.5x the yearly revenue but i don´t know if it´s too low or too high price to sell, because this is not a flipping site, this is a complete business with customers, organic traffic, and a constant stream of revenue.

So what do you suggest that i should ask for?

Thanks,
Morg
#business #calculate #price #sale #selling
  • Profile picture of the author Jason Kanigan
    Consult an accountant.

    "Times Earnings" is a common way of valuing a business--an industry multiplier is applied to your average annual earnings.

    For the internet field, I believe a 4x figure is typical.

    But consulting an accountant is your best bet.
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  • Profile picture of the author Kieran R
    Although a lot of people like to sell their site for a high amount because a lot of money has been spent on it, or even a lot of time, however most buyers really dont care about that.

    Unless your site is something really revolutionary or has clearly massive potential then most buyers are only going to pay an amount based on the revenue the site makes.

    I usually work it out as follows. If your site is very new and has only had 2 or 3 months of revenue then you cant really charge more than 6 months worth of revenue. However if its a bit more established, like a year old then you may get 10-12 times the monthly revenue. If your site is much older than that then the price you sell for is really unlimited in my opinion.
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    • Profile picture of the author morg2k2
      Originally Posted by Kieran R View Post

      Although a lot of people like to sell their site for a high amount because a lot of money has been spent on it, or even a lot of time, however most buyers really dont care about that.

      Unless your site is something really revolutionary or has clearly massive potential then most buyers are only going to pay an amount based on the revenue the site makes.

      I usually work it out as follows. If your site is very new and has only had 2 or 3 months of revenue then you cant really charge more than 6 months worth of revenue. However if its a bit more established, like a year old then you may get 10-12 times the monthly revenue. If your site is much older than that then the price you sell for is really unlimited in my opinion.
      Kieran thanks for your feedback.
      But i believe one thing is selling just a website, and another much different is selling a business that will include all your customers, social pages, business engagement that you created, etc.
      About the website you should have in mind the investment you made designing , coding and providing contents, of course that must have a value,eventhough therevenue is the most important for the buyer, but i believe that should have a global scope of it.
      In this case it has 1k revenue on a monthly basis having an history of 17 months plus everything i have related in the begining of this thread.
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  • Profile picture of the author WillR
    I think you are definitely pushing it expecting 2.5 times the yearly revenue. That would mean 30k for your business and at in it's current state that would mean it would take the person 2.5 years just to get their money back. That's just to break even and that's considering all things remained constant throughout that time.

    I would rather put my money in the bank for 2.5 years at 5% and collect $3750 profit after those two years. No risk.

    In short, just like houses your business is only worth what someone is willing to pay for it. With such a low monthly revenue, a small list, and such an inconsistent form of new business coming in I just can't see the value for the money you would be asking.
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    • Profile picture of the author morg2k2
      Originally Posted by WillR View Post

      I think you are definitely pushing it expecting 2.5 times the yearly revenue. That would mean 30k for your business and at in it's current state that would mean it would take the person 2.5 years just to get their money back. That's just to break even and that's considering all things remained constant throughout that time.

      I would rather put my money in the bank for 2.5 years at 5% and collect $3750 profit after those two years. No risk.

      In short, just like houses your business is only worth what someone is willing to pay for it. With such a low monthly revenue, a small list, and such an inconsistent form of new business coming in I just can't see the value for the money you would be asking.
      Well i believe every business has his own risk. Thats why in 2.5 years in a bank you will get 3.75k vs 30k income in this business. About customers i do prefer to have 200-300 active buyers vs 5k-10k non responsive list (as you can see in fiverr for ex). Plus there is a lot of ways to icrease revenues as in any business (seo, ppc, media buy, etc) i will take a look at consultant.

      Regards,
      Morg
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      • Profile picture of the author WillR
        Originally Posted by morg2k2 View Post

        Well i believe every business has his own risk. Thats why in 2.5 years in a bank you will get 3.75k vs 30k income in this business. About customers i do prefer to have 200-300 active buyers vs 5k-10k non responsive list (as you can see in fiverr for ex). Plus there is a lot of ways to icrease revenues as in any business (seo, ppc, media buy, etc) i will take a look at consultant.

        Regards,
        Morg
        Yeah, was just my opinion. I didn't say you don't earn 30k in 2.5 years. What I did say is if someone has bought the business for 30k then it's going to take them that long just to break even and be back at square one... then they need to turn a profit. So in 2.5 years I could have 3.75K profit in my bank account by doing nothing or 0K profit by slogging it out providing services for 2.5 years. I prefer the first option. But sticking your money in a bank is one of the worst things to do so it's not even a great example.

        Can I ask why you are selling the business if there is such room for growth?

        That will obviously be the first question potential buyers ask you.
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        • Profile picture of the author morg2k2
          Originally Posted by WillR View Post

          Yeah, was just my opinion. I didn't say you don't earn 30k in 2.5 years. What I did say is if someone has bought the business for 30k then it's going to take them that long just to break even and be back at square one... then they need to turn a profit. So in 2.5 years I could have 3.75K profit in my bank account by doing nothing or 0K profit by slogging it out providing services for 2.5 years. I prefer the first option. But sticking your money in a bank is one of the worst things to do so it's not even a great example.

          Can I ask why you are selling the business if there is such room for growth?

          That will obviously be the first question potential buyers ask you.
          Well i want to change niche and was thinking on selling this business.
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  • Profile picture of the author Kurt@viewswin
    It's worth 5k max
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  • Profile picture of the author frettcarla
    Sit with a internet expert and also with a chartered accountant. Your problem will be solved instantly.
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  • Profile picture of the author Thomas Smale
    I've sold quite a few "social media" marketing businesses, and the average multiple we have been seeing is around 8-10x monthly net income.

    It's an extremely competitive niche with a number of legal issues, hence an average multiple far below industry standards. You also have a trademark issue with your domain ("YouTube" in it) so actual sales price might be even lower than average.

    I'm sure that's not what you wanted to hear, but take it from someone who is extremely active selling sites and knows how buyers think. My advice, before you consider selling would be as follows:

    - Register a new domain name (that doesn't infringe a trademark) and 301 redirect what you have to the new site.
    - Automate your current systems or outsource as much as possible
    - Scale the business as much as you can.
    - Focus on recurring clients

    Don't bother consulting an accountant. Firstly, your business is too small. And secondly, it's very rare to find an accountant with any experience of selling online businesses and in my experience they grossly over-value online business vs. what the market is actually paying.
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    I specialize in selling websites over $10,000 in value. No obligation, confidential valuation here.
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    • Profile picture of the author morg2k2
      Originally Posted by Thomas Smale View Post

      I've sold quite a few "social media" marketing businesses, and the average multiple we have been seeing is around 8-10x monthly net income.

      It's an extremely competitive niche with a number of legal issues, hence an average multiple far below industry standards. You also have a trademark issue with your domain ("YouTube" in it) so actual sales price might be even lower than average.

      I'm sure that's not what you wanted to hear, but take it from someone who is extremely active selling sites and knows how buyers think. My advice, before you consider selling would be as follows:

      - Register a new domain name (that doesn't infringe a trademark) and 301 redirect what you have to the new site.
      - Automate your current systems or outsource as much as possible
      - Scale the business as much as you can.
      - Focus on recurring clients

      Don't bother consulting an accountant. Firstly, your business is too small. And secondly, it's very rare to find an accountant with any experience of selling online businesses and in my experience they grossly over-value online business vs. what the market is actually paying.
      Thanks for your suggestion. I am preparing a new domain with a new full web design then will redirect.

      Even 8-10x for this kind of business i believe is to low to sell.

      Thanks,
      Morg
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      • Profile picture of the author Thomas Smale
        Originally Posted by morg2k2 View Post

        Thanks for your suggestion. I am preparing a new domain with a new full web design then will redirect.

        Even 8-10x for this kind of business i believe is to low to sell.

        Thanks,
        Morg
        Yes - multiples are quite low in the niche so it's often not worth selling in some cases. It's up to you whether you want to sell or keep it. I have seen higher multiples, but that would be for a site making $10k/mo in the niche - at that level it's more of a sustainable business. At your current level, buyers are really just acquiring a job.
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        I specialize in selling websites over $10,000 in value. No obligation, confidential valuation here.
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        • Profile picture of the author morg2k2
          Thanks for your valuable answer.
          i will prefer to keep it and increase the gain until hopefully reach 5k-10k per month. For what i have seen its not that difficult, its a question of commitment and marketing budget.

          Thanks,
          Morg
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          • Profile picture of the author Thomas Smale
            Originally Posted by morg2k2 View Post

            Thanks for your valuable answer.
            i will prefer to keep it and increase the gain until hopefully reach 5k-10k per month. For what i have seen its not that difficult, its a question of commitment and marketing budget.

            Thanks,
            Morg
            Yes, that's right - plenty of sites doing those numbers in the niche. Most of the sites doing 5 figures a month also build a list of customers and market to them regularly. Much easier to sell to customers who have bought before than find new ones.
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            I specialize in selling websites over $10,000 in value. No obligation, confidential valuation here.
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