Valuing an online business

[bizman]

What are some of the multiples or formulas one uses in valuing an online business? What are the factors one looks at? Has anyone here ever have any experience on either side of such a transaction? Do you know of any means of reference to which you can point to help find such answers? Thanks.

 

[drillbill]

Much of this depends on the type of business you are talking about. Is it a software business, online services business? Does it have revenue? Is it cash flow positive?


A common strategy is to use a net income multiple. Software businesses for example generally have a net income multiple of between 3-6 times net income when calculating worth. For example, if your software company earns 1MIL annually then you could guess that this company might be worth between 3-6MIL dollars.


Here is a link which discusses some strategies.


http://www.softwarebusinessonline.co.../valuation.pdf

 

[drillbill]

Great link drillbill, just checked it out and I found my business not be that valuable at the moment