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Can put this in newbie terms please?

by Superior Content Creation
2 replies
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...
#newbie #put #terms
  • Profile picture of the author 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
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    • Profile picture of the author Superior Content Creation
      Originally Posted by Frank Donovan View Post

      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.
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