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Your Easy Guide to Understanding the Website Valuation Process

Posted by Chris Kern in Articles

Thinking about selling your website based business but you’re not sure where to start? One of the most crucial components of making the final decision to list your website for sale and in recovering as many funds as possible through this process, includes valuation.

Valuation gives you a good perspective on whether or not now is the right time to sell your business. But the process of website valuation often feels overwhelming for business owners.

A primary goal for many business owners who establish a successful company is to eventually sell their business to a different entrepreneur. The entrepreneur who purchases the business may want to take control of a company that already has established success without many of the headaches of building an entire new business.

For this reason, many people who have structured a website to a certain point to achieve profitable numbers and systems behind the scenes means hiring an online business broker.

Online business brokers will work with investors who already have an interest in purchasing your company to help match you to the right one. How websites are valued is a very common question asked of online business brokers. A very basic formula is behind the concept of business valuation.

First of all, this usually begins by looking at a 12-month net profit average and then using a multiple. Here at Website Closers, we’ll explain to you the entire process of valuing your website based business so that you know what to expect. You must be able to show, as you get closer to higher multiples, that your business is growing in a big way month over month. This helps make you even more appealing to prospective buyers.

You might see some people using a different model but at Website Closers, we are upfront with exactly how the multiples work and what you can anticipate. Looking at factors such as your average net profit, add-backs and expenses can all help you to determine what will influence the overall website valuation.

The longer company history you can show in your business, the more attractive it is to prospective buyers so long as it is showing an upward trend or moving at a consistent profit level. The more your business is going upward, the easier it is to use a higher multiple. Although you can’t do a great deal to increase the amount of time that your company has been in business, you can invest in necessary purchases early on in your company to prepare yourself for eventual sale.

A consultation with an online business broker like those working at Website Closers will help you to understand the various metrics that are used in website valuation and how to best set yourself up for success. Whether you’re looking to sell a Shopify or other ecommerce business, or an Amazon based FBA business, the insight of an experienced business broker is instrumental in helping you feel more confident about selling your company sooner rather than later.