Can put this in newbie terms please?

Superior Content Creation · 05-09-2009, 12:34 PM

At the risk of sounding like an idiot--I don't exactly understand what this means. I inquired about a website for sale and asked what kind of income it was producing. The guy wrote that his asking price "reflected twice the net profit for last year at 20-30% profit margin." Can someone put that in newbie terms for me? Maybe I'm overanalyzing, but there seems to be a couple different ways that could be interpreted--or maybe my understanding is just off...

Frank Donovan · 05-09-2009, 01:03 PM

Hi dru-man

The site owner is either referring to the last 12 calendar months or to the whole of 2008.

I assume, with those profit margins, the site is selling physical goods. If so, the net profit is what remains after the cost of production/purchase of the product(s) and any associated shipping, handling, and processing costs. It should also be net of any taxes.

You should also find out what the marketing expenditure has been for the period in question. A true net profit figure is what is left after all such costs have been deducted.

As an aside, if I were negotiating to buy a site, I'd insist on seeing the actual figures/balance sheet - not just the notional profit margin.

Best of luck.

Frank

Superior Content Creation · 05-09-2009, 01:31 PM

Quote:

Originally Posted by Frank Donovan

Hi dru-man

The site owner is either referring to the last 12 calendar months or to the whole of 2008.

I assume, with those profit margins, the site is selling physical goods. If so, the net profit is what remains after the cost of production/purchase of the product(s) and any associated shipping, handling, and processing costs. It should also be net of any taxes.

You should also find out what the marketing expenditure has been for the period in question. A true net profit figure is what is left after all such costs have been deducted.

As an aside, if I were negotiating to buy a site, I'd insist on seeing the actual figures/balance sheet - not just the notional profit margin.

Best of luck.

Frank

Yes, I definitely plan on doing that but I am just asking questions at this point to see if it is worth moving forward on. Thanks.

05-09-2009, 12:34 PM	#1
Superior Content Creation James Druman War Room Member Join Date: Apr 2009 Location: Current' "hanging out" in Southeast Asia. Posts: 392 Thanks: 885 Thanked 85 Times in 53 Posts Social Networking Contact Info	Can put this in newbie terms please? At the risk of sounding like an idiot--I don't exactly understand what this means. I inquired about a website for sale and asked what kind of income it was producing. The guy wrote that his asking price "reflected twice the net profit for last year at 20-30% profit margin." Can someone put that in newbie terms for me? Maybe I'm overanalyzing, but there seems to be a couple different ways that could be interpreted--or maybe my understanding is just off...

05-09-2009, 01:03 PM	#2
Frank Donovan Unplugged War Room Member Join Date: Jul 2008 Location: London, UK. Posts: 1,504 Thanks: 538 Thanked 1,274 Times in 643 Posts Contact Info	Re: Can put this in newbie terms please? Hi dru-man The site owner is either referring to the last 12 calendar months or to the whole of 2008. I assume, with those profit margins, the site is selling physical goods. If so, the net profit is what remains after the cost of production/purchase of the product(s) and any associated shipping, handling, and processing costs. It should also be net of any taxes. You should also find out what the marketing expenditure has been for the period in question. A true net profit figure is what is left after all such costs have been deducted. As an aside, if I were negotiating to buy a site, I'd insist on seeing the actual figures/balance sheet - not just the notional profit margin. Best of luck. Frank
	Two of our Warrior friends need urgent help. Please check out Kim's WSO Or donate HERE And Ken's WSO is now live! Two MEGA WSOs out at once - A Perfect Storm!