How to value a website or online business
Valuing an online business comes down to one equation — profit times a multiple — but every part of it hides a judgement call. Which profit, which multiple, and what moves it. Here is how the number is actually built, and how to get it right whether you are buying or selling.
The equation: profit × multiple
Almost every online business is valued the same way: take its annual profit and multiply by a number. A business earning $40,000 a year that sells at a 3× multiple is worth about $120,000. Everything else in valuation is about getting the two inputs right.
Which profit: SDE, TTM and add-backs
For owner-operated businesses the profit figure is SDE — Seller’s Discretionary Earnings — which is net profit plus the owner’s pay and any one-off or personal costs added back. Larger businesses use EBITDA instead.
Use the trailing twelve months (TTM), not a single strong quarter annualised, so seasonality and a lucky month do not distort it. And scrutinise the add-backs: only costs the buyer will genuinely avoid belong in SDE.
Which multiple: read it from real sales
The multiple is set by the market, not by the seller. SaaS commands the highest multiples because revenue is recurring and margins are high; content and affiliate sites sit lower; eCommerce is in between and carries inventory. The reliable way to find the right multiple is the median of comparable closed sales in the same model.
Acquisiteur’s valuation tool does exactly this — it applies the median multiple from the sales it has recorded in your model, and shows how many sales it is drawn from, so you can weigh the figure rather than trust it blindly.
What moves the multiple up or down
Two businesses with the same profit rarely sell for the same price. Growth lifts the multiple; decline cuts it. Diversified, verifiable revenue lifts it; a business dependent on one keyword, one platform or one customer cuts it. Clean books and low owner-involvement lift it; a business that runs on the founder’s daily effort cuts it.
Revenue multiples for pre-profit businesses
Some businesses — fast-growing SaaS, or ones reinvesting everything — have little or no profit to multiply. These are valued on a multiple of revenue instead, which is a looser, riskier basis. If you are valuing on revenue, weight the quality and growth of that revenue heavily, because there is no profit cushion underneath it.
Questions
- How much do websites sell for?
- Anywhere from a few hundred dollars for a starter site to eight figures for an established business — but as a rule of thumb, most sell for roughly 2× to 5× their annual profit, with the exact multiple set by the model, growth and how verifiable the earnings are.
- What is the average multiple for an online business?
- It varies sharply by model. SaaS tends to clear the highest multiples, content and affiliate sites the lowest, with eCommerce in between. The current median by model, from real closed sales, is on Acquisiteur’s valuation tool.
- Should I value on revenue or profit?
- Profit (SDE) for any profitable business — it is the more reliable basis. Revenue multiples are only for businesses that have not turned a profit yet, and they carry more risk because there is no earnings cushion under the price.