More Details on Selling Your Website or Online Business
If you have been searching around for a business valuation calculator, you might be interested in selling your business. At the very least, wanting to get a free business valuation so that you know what your business would be worth if you decided to sell on. Let’s go ahead and break down how online business valuation works.
The Method to Valuing Online Businesses
Before you get started using a business valuation calculator, it is essential to understand what factors and processes go into an online business valuation. As we will explore, getting a free business valuation is easy and will offer you a realistic estimate of what your business is worth.
What Are Multiples
One of the most important factors to consider before you use a business valuation calculator is the multiples. These are part of the process used automatically to determine how much your business is worth. There is one main type of multiples that you should at least know about. The common multiples range from 35-65x and these are determined by a variety of different factors like; the age of your business, type of business, recurring revenue, hours worked, income diversification, and many other variables.
Valuations Based On The Profitability of Your Business
Figuring out how much your business is worth can be a fairly quick process if you understand your profit and loss (P&L) and have these as accurate as possible. The majority of businesses under $10M are going to be based primarily on your profit. Of course, there are other factors to consider but primarily increasing your profit is going to be the fastest way to increase your business valuation. Once you have the average monthly net profit determined, you can use this number to find an accurate valuation.
How the Valuation Formula Works – Example
Typically, a business valuation calculation calculator works using a specific method. The most common online business valuation will hold into account your monthly average net profit. The average net profit is multiplied by a particular number of months. Usually, this is anywhere between 35 – 65x. For example, if you make an average net profit of $10,000, your business can be worth anywhere between $350,000 – $650,000. If this seems like a great fit you can schedule a free exit planning consultation here to discuss selling your business.
How the Business Valuation Calculator Works
Since the process of going through an online business valuation might not be as simple as what the valuation formulas above might imply, you might be interested in how specifically the calculation is done. Thankfully, the process is usually as simple as it would seem on the surface, but things get a little more in-depth when you decide to sell your business since all of the financial details need to be combed through. No legitimate buyer would ever consider buying a business without having the financial details in order.
Input Your Business Info
The first step in using a business valuation calculator is to input basic information on your business. This will also help the system eventually pair you with the right platforms to sell your business. Once you put in your basic info, it will generate an accurate business valuation in a matter of seconds. This is a very accurate valuation if you have the correct numbers (within 90%), but if you want an even more accurate valuation it’s best to start here and schedule a free exit planning consultation.
Considers Your Monthly Revenue
As we briefly mentioned, the most critical factor to consider when doing an online business valuation is how much money you are making. As a result, those with a higher monthly net profit will always be able to sell their business for the highest possible price.
How Much Is Your Website And Online Business Worth?
Before you use the online business valuation tool, you might be wondering if different types of businesses receive different quotes on their value. The answer is a resounding yes! The exact value of your business will heavily depend on the type of business itself.
How Much Is My Amazon FBA (Fulfillment By Amazon) Business Worth? (Approximately 40-55x)
Amazon FBA businesses have completely skyrocketed over the past year, this is largely due to the growing number of M&A firms that are acquiring and building portfolios of Amazon FBA businesses. If you have an Amazon FBA business, you will need to focus on a few factors to make it more appealing to buyers and the structure of your business can determine a 40x or 55x multiple.
How Much is my Shopify Business Worth? (Varies on Business Type)
Shopify is another great platform and shares some parallels with Amazon FBA, but most people that use Shopify either have a Dropshipping business, E-commerce or they have an FBA business. Since it’s such a large variant, see the other valuations to determine which range is most accurate.
How Much is my E-Commerce Business Worth? (Approximately 45-55x)
One of the big benefits of having an e-commerce business is that you might not depend solely on larger platforms for your monthly income. As a result, you might also be able to sell this sort of business for a higher price than those who are Dropshipping their products, since there is a bigger moat and more proprietary products.
How Much is my SaaS Business Worth? (Approximately 65-75x)
Software as a service (SaaS) is one of the most lucrative businesses to sell since the majority of these businesses have recurring revenue, this way it is much easier to predict how much profit and revenue they will generate and every year the earnings continue to stack on top of eachother.
How Much is my Dropshipping Business Worth? (Approximately 35-45x)
Dropshipping businesses can be a little harder to sell depending on the structure you have for your business. If you are dropshipping the same products as thousands of other people on Ali-express, then it is going to be hard to exit your business. Although, if you have built a strong brand with a moat around the business, then it will potentially be a very lucrative business to sell.
Selling an Online Business Quickly
More than likely, you are not only interested in selling your business but doing so promptly. The last thing a business owner wants to do is carry on with administrative tasks for months after deciding to sell the business. This will not only take a toll on your motivation but can add up in a lower business value if carried on for long. In general, it takes around 2-3 months to sell a business, but these factors can vary a lot depending on the business type and how much it’s valued at. For example, a $60,000 business will sell much faster than a $10,000,000 business since there are just so many more buyers with capital to acquire the $60k business.
Your Desired Price Should be the Most Important Factor
One of the common mistakes that people will make is not letting their price target be fulfilled. Instead, they will jump on the first decent offer that presents itself. Be careful not to make this mistake, as it can leave you with less money for your business than you are rightfully entitled to. Being patient and waiting around for offers until you get one that matches your price target. Otherwise, you can focus on building your business up more to higher levels.
Final Steps to Sell Your Online Business
If you want some further guidance on how you can sell your online business, you are encouraged to read up more from those who have done this for a living. At the end of the day, selling a business can be fairly complicated and we can help you find a buyer in potentially 1-2 months. If you would like to schedule a free exit planning consultation, make sure to click right here.